US Fed Rate Hike Inbound | Westpac 

2 November 2022

New Zealand Market Movers 

The New Zealand market (NZX 50 Index, -0.2%) fell slightly on Tuesday. 

Pushpay (+1.6%) climbed closer to its takeover bid price of $1.34 per share, while helping to prop up Information Technology (+1.6%) which led the market’s sectors on the day. 

New Zealand King Salmon (-8.5%) sold off after announcing the abrupt resignation of its Chief Executive Grant Rosewarne. Metro Performance Glass (-9.0%) announced it would be releasing its Full Year 2023 Interim results on 29 November 2022 and subsequently cratered on the day.    

Australia Market Movers 

The Australian market (ASX 200 Index, +1.7%) advanced to a seven-week high after the Reserve Bank of Australia decided on an interest rate hike of 25-basis-points to 2.85%, in line with expectations. The bank also revised up its forecast for peak inflation to 8.0% (up from 7.75%) and revised down its forecast for GDP growth for the next 2 years.  

Sectorial leaders for the day included the Metals & Mining (+2.8%), Materials (+2.6%), and Resources (+2.6%).   

Europe Market Movers  

European markets (Stoxx 600 Index, +0.5%) closed higher on Tuesday, with Mining (+3.3%) stocks leading gains. 

BP (0.0%) traded flat after reported stronger-than-expected net profit of $8.2 billion for the three months to the end of September. Across the pond, US President Joe Biden called on oil producers to work to cut gas prices or his administration would pursue windfall taxes. Biden highlighted that the US’s six largest oil companies had reported a combined $100 billion in profits over the last 200 days. 

US Market Movers 

US markets (S&P 500 Index -0.3%) slipped after JOLTs Job Openings for September beat expectations (10.72 million vs. 10.28 million expected), giving up opening gains. The resilience in the jobs market means the US Federal Reserve is unlikely to perform a dovish pivot in respect to its interest rate decision which is due to deliver at 7:00 am tomorrow morning. The Federal Reserve is expected to raise interest rates by 75-basis-points. 

Stock In Focus 

Westpac (WBC.ASX)

Westpac (+0.9%) advanced on Tuesday in response to the Reserve Bank of Australia’s interest rate hike. It is only a matter of time until Westpac passes the hike onto its customers, following NAB’s lead, who was the first bank off the block, noting within hours of the RBA’s decision that it will pass on the full 0.25% hike to its customers next Friday. Yesterday’s rate hike will mean mortgages of $500K will require an additional $75 per month to service. 

We remain BUY rated on Westpac. At the current juncture, WBC remains attractively priced, paying out a healthy dividend (currently 5.2%) compared to its big 4 Aussie bank peers, and most importantly from 2024 onwards this rises to ~7%.    

What Markets will be Watching this Week (UTC +13) 

Monday 
EA Inflation Rate Year-on-Year Flash OCT 

Tuesday 
AU RBA Interest Rate Decision 

Wednesday 
US Manufacturing PMI OCT  

US JOLTs Job Openings SEP 

Pfizer earnings 

AMD earnings 

Airbnb earnings 

Thursday 
US ADP Employment Change OCT 

US Fed Interest Rate Decision 

Estee Lauder earnings 

Booking Holdings earnings 

Friday 
GB BoE Interest Rate Decision 

Starbucks earnings 

Saturday 
US Non Farm Payrolls OCT 

Berkshire Hathaway earnings 

The New Zealand market (NZX 50 Index, -0.2%) fell slightly on Tuesday. Pushpay (+1.6%) climbed closer to its takeover bid price of $1.34 per share, while helping to prop up Information Technology (+1.6%) which led the market’s sectors on the day. New Zealand King Salmon (-8.5%) sold off after announcing the abrupt resignation of its Chief Executive Grant Rosewarne. Metro Performance Glass (-9.0%) announced it would be releasing its Full Year 2023 Interim results on 29 November 2022 and subsequently cratered on the day.    

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