Global markets were mostly up on Friday, with US markets (S&P 500 +0.9%) closing at fresh record highs.
US Federal Reserve Chairman Jerome Powell announced that the central bank will pull back on some of its monetary stimulus measures, saying it’s likely to start tapering its $120 billion in monthly bond purchases later this year – also making clear that interest rate hikes would not immediately follow after tapering was over. This was seen as a positive sign for equity markets as it distinguished between asset purchases and interest rate hikes.
Powell confirmed that inflation had met the Fed’s “substantial further progress” criterion for tapering while saying there had been “clear progress” on the employment side of the Fed’s mandate, while reiterating the Fed’s view that current inflationary pressures are mainly transitory.
Markets seem relieved the Fed isn’t planning to raise rates soon, with most sectors trading higher. Energy stocks lead the way as well as other more economic sensitive stocks, while the more defensive Healthcare and Utilities were weaker.
European Markets were up on Friday (Stoxx 600 index, +0.4%) following the US Fed’s comments pushing mining and reals estate stocks higher.
Next DC (NXT:ASX)
Data centre operator Next DC (NXT) shares fell -5.4% on Friday, despite delivering another record result for the 2021 financial year.
For the year, revenue grew by 23% from last year to $246.1m driving operating earnings (EBITDA) higher up +29% to $134.5m – beating guidance. Operating cashflow increased by 148% to $133.2 million.
Looking ahead into the 2022 financial year management expect growth to continue, guiding data centre services revenue to jump by at least +15.8%, and operating earnings (EBITDA) by at least +19% – with a strong pipeline of development work to drive medium to long-term growth.
Next DC shares have been on a strong run recently – especially since our last report in March and a pull-back is not unexpected, with some investors having heightened near-term expectations, combined with guidance being softer than the market had anticipated.
We believe Next DC is quality company with strong medium and long-term growth potential from further cloud adoption and increase in data creation, with adequate balance sheet space to fund projects to expand their data centre capacity – and play the explosion of data investment theme
Australia & New Zealand Market Movers
The Australian market finished Friday more or less flat (ASX 200 index -0.04%), as a few strong results miss investors heightened expectations.
Wesfarmers shares fell -2.8% delivering their 2021 full year result as revenue increased +10%, while net profit after tax jumped 16.2% to $2.4 billion driven by strong growth from Bunnings and Kmart – but added the next few months would be difficult with lockdown restricting retail activity.
Rare Earth miner Lynas also delivered a record result net profit after tax surging +710% to $157.1m –unfortunately its shares slipped -3.6% weakness felt with most miners trading weaker on the day, Lithium Miner Orocobre was down -5.2%, and BHP slipped -0.6%.
Ardent Leisure soared +9.9% after surprising the market delivering a better thane expected result operating earnings rose +165% form last year (which was greatly impacted by covid).
A handful of other travel related stocks were higher following optimism of international travel returning sooner than anticipating following commentary from Qantas a day earlier – Qantas (+2.2%), and Sydney Airport (+1.9%).
The New Zealand market was also more or less flat on Friday (NZX 50 index, +0.06%), on a day full of disappointing results.
Vista shares rose +8.4% after delivering a much smaller loss than investors had worried about of $2.6m, a significant improvement from the $43.2m loss in the same corresponding period last year.
Delegat Wine shares slipped -1.6% after delivering another record result which was inline with guidance adding labour shortages and supply chain disruptions prevented a further ~6% (200,000) in cases from being delivered.
Tourism Holding shares rose +4.7% after a broker upgrade which felt upbeat about the companies ability to make a recovery once international boarders reopen.
Air NZ did not get the same treatment as it slipped -0.7%. Likewise, A2 Milk was the biggest decliner for the second day in a row down -3.9% both stocks appearing to have another difficult year ahead with their recovery a lot less certain.
3 Things Markets will be Watching this Week
- Locally Earnings season eases down. Major names including Fortescue, Altium, Harvey Norman, Healius, and Crown.
- ANZ Business Confidence survey in NZ will be released along with Q2 GDP in Australia.
- Globally, economic events this week include Nonfarm payrolls in the US along with the latest ISM activity data, Chinese PMI data and Eurozone CPI.
