Global markets have been extremely volatile overnight, as US Markets (S&P 500 Index +1.5%) quiet remarkably closed in the green after experiencing a sharp decline on the open.
The initial shock was caused by Russia executing their attack onto Ukraine and there were reports of explosions and missile strikes on several key Ukrainian cities including its capital, Kyiv. T%he Russian market experienced its biggest decline on record, plummeting -33%. Russian President Vladimir Putin called the invasion “the demilitarization” of Ukraine and said Russia’s plans do not include the occupation of Ukrainian territories.
President Joe Biden addressed Russia’s invasion of Ukraine on Thursday, announcing that the U.S. will introduce a new wave of sanctions against Russia in a broad effort to isolate Moscow from the global economy.
The US markets rebounded strongly, with most shares trading higher, at one point the NASDAQ nearing bear market down almost -20% from its peak (2-months ago) which may have prompted investors to “buy the dip” on some of the biggest tech names during Thursday’s volatile session (S&P 500 chart below).
Most sectors were up with tech shares leading gains (given the sector really is not impacted by the Russia situation), while consumer staples and financials were the laggards but also clawed black larger losses. Mega cap tech stocks (Apple, Meta, Amazon Microsoft, Alphabet) all rose strongly up 4-6%, with many other tech names which have sold off recently reporting strong gains some reporting double digit gains. Renewable stocks such as solar and wind companies also understandably had a strong session.
European Markets ending the session 3-4% lower (Stoxx 600 -3%) as banks, automotive and travel sectors were hit hardest. European markets are much more directly linked to Russia, with Countries such as Germany heavily reliant on Russian gas etc. We think that US stocks will outperform European stocks over the near term.
Next DC (NXT:ASX)
Next DC was one of a few stocks trading in the green yesterday, up +3.4% after delivering another record half year result,. Revenue rose +19% from last year to $144.5m, and underlying earnings (EBITDA) was up +29% to $85m. The company stating strong growth with customer acquisitions and contractual utilisation, looking ahead Next DC also upgrading its earnings and capital expenditure guidance to accelerate project investments and put it self in strong position to take advantage of current and future customer opportunities.
We remain BUY rated on Next DC
Summerset (SUM:NZX)
Summerset shares were down only -0.9% yesterday, after delivering a solid full year result to help offset a weak day across the market plagues by Russia invading Ukraine and covid cases locally storming to new highs (which is still viewed as a risk to retirement villages). Underlying net profit after tax rising +44% from last year to $141.1m, driven by a strong year of sales and benefitting from healthy development and resale margins, while reported net profit after tax soared +136% to %543.7m, benefiting from surge in house prices.
With improved asset base, total assets rose +26% to $4.9 billion, and gearing ratio reduced to 27.8% – its lowest level since 2013, making it well equipped for any softening in the housing market
We remain BUY rated on Summerset due to its solid growth pipeline, and it is still attractively priced trading at 1.37x its new net tangible asset per share of $8.359.
Australia & New Zealand Market Movers
The Australian market was down yesterday (ASX200 index -2.99%), as reports of Russia Invading Ukraine and explosions in the Ukrainian capital of Kyiv saw the market experiences its largest single day fall since September 2020.
Investors were extremely risk off tech and material sectors leading losses, as investors fled to safe haven assets like gold and bonds. Gold Miners Northern Star Resources (+5.9%), Newcrest Mining (+4.0%) and Evolution Mining (+4.8%) all gained on hopes investors would rush into safe gold.
CIMIC rocketed +33.4% after 79% shareholder HOCHTIEF launched a cash takeover offer. Ramsey Health Care gained +0.2% after beating 2022 first-half estimates, and their interim dividend came in higher than expected.
The New Zealand market was down on Wednesday (NZX 50 index, -3.3%) reporting its largest fall since the covid crash in March 2020, with majority of the market suffering heavy losses – spurred Russia announcing full-scale invasion in Ukraine.
Scales Corp delivered a strong full year result for 2021, operating earnings coming in at $74m, ahead of guidance and expectations – keeping 2022 earnings guidance unchanged $62-67m which is a positive given omicron escalation, impacts from the Tonga eruption and ongoing labour market issues since guidance was first provided in December.
Sky TV fell -7.4%, when its result came in within guidance and did not provide anything extra that investors were anticipating leading up to it.
Air NZ fell -4.1% on it weak result with losses larger than expected, the airline stating that its earnings going forward will also take hit from elevated oil prices. Auckland International Airport fell -3.4% despite its result faring much better delivering a much smaller loss than expected thanks to lower costs, while looking ahead cautioned that there would be no meaningful international recovery until there is no self-isolation for travellers.
3 Things Markets will be Watching this Week
- Geopolitical Risks – Russia/Ukraine
- US housing data, and CPI (inflation) data from Eurozone. The RBNZ makes an interest rate decision.
- Local earnings with its busiest week, A2 Milk, Costa, Heartland Bank, Woolworths, Rio Tinto, Wisetech, Air NZ, Scales Corp, Summerset, Qantas, Delegat, Harvey Norman and Tourism Holdings reporting.