New Zealand Market Movers
The New Zealand market (NZX 50 Index, -1.2%) was dragged down by Fletcher Building (-3.7%) after its Australian counterpart James Hardie Industries (-13.7%) lowered its 2023 earnings forecast in the face of a slowing housing market.
Other heavyweights down on the day included Freightways (-3.7%) and Fisher and Paykel Healthcare (-0.9%), tempered by the rally in A2 Milk (+4.1%).
Auckland International Airport (-2.7%) and Air New Zealand (-0.6%) were clipped as rumours that China will taper its zero-Covid policy fail to be confirmed by Chinese authorities.
Australia Market Movers
The Australian market (ASX 200 Index, +0.4%) rose slightly, with Retail (+1.1%) leading sectors, even as weaker-than-expected consumer fell to its lowest level since April 2020. The Westpac Consumer Confidence Index fell 6.9% to 78 (vs. 82 expected). Further, the NAB Business Confidence report recorded its lowest print since December 2021, falling 5 points to 0.
Today, the National Australia Bank reveals its earnings for the six months to September 30, 2022.
Europe Market Movers
European markets (Stoxx 600 Index, +0.8%) climbed to an eight-week high on Tuesday, with Energy stocks (-1.6%) the only sectorial laggard, as Crude Oil (-2.8%) prices decline.
Danish jeweller Pandora (+10.6%) surged after reporting better-than-expected quarterly sales which suggests resilient consumer demand for lower-end luxury products.
US Market Movers
US markets (S&P 500 Index +1.0%) were choppy but eventually closed higher for the third straight day as US midterm election results start filtering in. As it stands, Republicans are favored to win the House of Representative, while the Senate control appears tight. A surprise win for the Democrats could likely end stocks’ winning streak.
Ten of the Eleven sectors were in positive on Tuesday, led by Materials (+1.7%) and Technology (+0.9%).
Disney (-0.6%), reported its fourth-quarter earnings after the bell on Tuesday. The Company missed on Revenue, reporting $20.15 billion (vs. $21.24 billion expected) and immediately fell in after-hours trading. At the time of writing, it is down -5.1%.
Stock In Focus:
James Hardie (JHX.ASX)
James Hardie shares slumped -13.7% yesterday despite a strong half year result. What spooked investors was the dramatic change in the outlook for the housing market across all its key markets.
All are induced by the rapid rise in interest rates, causing customers to cancel their plans for new builds. The company notes that over the past 45 days, it has seen a significant change to the outlook of housing market activity for the second half. As a result, management has downgraded its guidance for its 2023 full-year Adjusted Net Income guidance range to US$650m to US$710m, changed from the prior range of US$730m and US$780m.
James Hardie had also scrapped its interim dividend but introduced a $200 million share buyback.
We downgrade James Hardie to a HOLD, given the downturn in the housing market is more likely to continue and worsen and a strong turnaround in activity over the medium term appears unlikely.