US Markets Take a Breather | Solid Elders Result

17 November 2021

Global markets were mixed overnight, with US markets (S&P 500 index) all ending the session unchanged as US Treasury yields reversed and climbed higher with the 10 year rate back above 1.61%. Newsflow was light as we have moved through quarterly corporate earnings season, and investors await the last few quarterly reports from big retailers later in the week. The price action in the bond market is acting as an indicator of how fluid and uncertain the inflation story really is.

Gains in Utilities and Energy stocks overnight were offset by losses amongst Materials and Tech stocks. Tesla extending its decline falling another -1.9%as Elon Musk started a Twitter war with Bernie Sanders, and tech darling Nvidia also lost -1.2% as investors pulled back their positions ahead of the company’s quarterly results this week.

European Markets (Stoxx 600 index +0.3%) were in positive territory as marginally positive China economic data was offset by weaker metals prices, resulting in retail and utilities stock rising while basic resources sank. 

Elders Limited (ELD:ASX) 

Elders shares slipped -0.7% yesterday despite delivering a solid result for their 2021 financial year, where sales and reported net profit after tax both rose +22% from last year. The company reported improved financial performance across all its product areas and locations particularly its retail division with better than anticipate gross margins due to increased backward integration and favourable market conditions. The only drag was the Feed and Processing business, which was under pressure from higher feeder cattle prices.

Elders were upbeat on their 2022 outlook, with a positive start with livestock prices remaining elevated and favourable summer crop outlook. 

We remain BUY rated on Elders as an attractive diversified agriculture play – and medium term investors have been rewarded with our first BUY recommendation given at just below $4 a share, with ELD currently trading at $12 per share. 

Australia & New Zealand Market Movers

The Australian market was up on Monday (ASX 200 index +0.4%), as most sectors traded in the green.

MesoBlast led the market up +11.8% after it released positive data from a phase three trial, and Resmed which jumped +5.2% as rival mask maker Philips was further investigated by the FDA. 

Tech shares were mostly strongly, taking Wall Streets lead – with Next DC leading its tech peers up +4.1%. Woodside Petroleum rose +1.1% after striking a deal with Global Infrastructure Partners for the sale of a 49% non-operation participating interest in the Pluto Train 2 joint venture.

Major miners BHP (-0.6%) and Rio Tinto (-0.4%) were weaker, after China reported slightly disappointing fixed asset investment data for the 10 months to October 2021.

The New Zealand market was higher yesterday (NZX 50 index +0.4%) partially recovering from last week’s sell off.

Last week’s heavy losers led gains, A2 Milk Company, which fell almost -7% last week, jumped +4.5%, as analysis of Singles Day (11:11) highlighted the A2 brand ranked third across the infant milk formula category, up from fourth in 2020.  

Pushpay Holdings rose +3.4%, after falling -20% last week, and Fisher & Paykel Healthcare jumped 4.8% more than offsetting the -4% drop it experienced on Friday.

Contact Energy shares rose +1.8% after reporting strong operating metrics for the month of October. Ryman healthcare suffered the biggest loss down –3.5%.


3 Things Markets will be Watching this Week

  1. Key events this week include CPI (Inflation) and employment data across the Eurozone and UK, and third quarter GDP in Europe.
  2. A raft of US housing market data is due along with retail sales and a data dump in China (retail sales, IP and fixed assets investment).
  3. Locally, CBA will release its first quarter result, AGM’s and Investor days held by  Aristocrat, Incitec Pivot, Ryman Healthcare, Afterpay, Seek, a2Milk, BlueScope Steel, Goodman Group, Resmed, Wisetech and Next DC.
Global markets were mixed overnight, with US markets (S&P 500 index) all ending the session unchanged as US Treasury yields reversed and climbed higher with the 10 year rate back above 1.61%.

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