Global markets sold-off overnight, as US markets (S&P 500 index -1.8%), fell after red hot inflation data in the US came in higher than expected, increasing fears of a more aggressive moves from the Fed to control it.
Headline US inflation (CPI) data surprised on the upside for the 8th time in the last 10 months, rising +7.5% year on year ( its highest annual increase in 40-years), a month on month increase of +0.6%. The 10-year US Treasury yield jumped 12.2 basis points to 2.05%, breaking past 2% for the first time since 2019, with shorter-term yields also moving sharply higher. The benchmark 10-year yield was at 1.51% at the end of December, and there are now elevating chances of the Fed bringing in a 0.5% interest rate hike in March.
The sell-off was experienced across the market with all sectors trading lower, with tech shares leading losses given their sensitivity to higher interest rates – mega cap tech shares were also not immune with the likes of Apple, Microsoft, and Google all declining over 2%.
Solid earnings helped some companies buck the trend but initially strong gains eased back. Disney ended the session up +3.4% reporting strong quarterly result as its parks and experiences revenue doubled showing a strong recovery in visitation numbers. Coca-Cola rose +0.5% as its revenue and earnings beat market estimates.
European Markets (Stoxx 600 index -0.2%) lost ground with most sectors trading in the red, with tech shares leading losses. although the tech sector weighting is much lower in Europe compared to the US.
National Australia Bank (NAB:ASX)
Australia’s second largest bank National Australia Bank (NAB), and last of the big 5 banks to report this week rose +4.5% yesterday after reporting a stronger than expected cash earnings coming in at $1.8 billion, up +12% from last year. The result was helped by net interest margins which slipped by only 5 basis points, not as bad as feared.
The result caused its lending peers to also report another day of modest gains. We do not have a rating on NAB, its result shows it is performing better than ANZ. We continue to see more relative value in Westpac shares at current levels and it remains our top sector pick.
Australia & New Zealand Market Movers
The Australian market was up yesterday (ASX200 index +0.3%), as Tech and banking stocks lead gains again.
AMP shares gained +5.9% after delivering underlying profit of $356m, up +53% from last year, while its reporting loss of $252m included a non-cash write down which flagged earlier.
Downer EDI shares slipped -2.5% despite its half year net profit rising +18%, as it warned around the covid impact on supply chain and labour shortages were delaying new projects.
Australian yields eased back, following its recent rise which caused tech shares to report modest gains across the board.
The New Zealand market (NZX 50 index -0.2%) was down on Thursday despite some strong results as much of the market gave back some of its recent gains preparing for US inflation print.
Sanford shares rose +4.7%, after clearing its frozen inventory benefiting from higher fish prices as salmon prices recovered, which also saw NZ King Salmon trade up +3%.
Vulcan Steel jumped +1.8% after it reported its first half revenue jumped +35% and net profit rose +85%.
3 Things M
arkets will be Watching this Week
- US Inflation (CPI) data will be in focus given its importance in regards to its importance for the interest rate track.
- US earnings from the likes of Pfizer, Toyota, Coca-Cola, Walt Disney, PepsiCo, L’Oreal, Astra Zeneca, Unilever and Uber.
- Locally, Australian & NZ earnings season commences, with results of note from Suncorp, CBA, AMP and Downer EDI.