Global markets took a breather on Friday (S&P 500 index -0.3%) putting a red mark on an otherwise positive week that saw each of the main indices surge into record territory.
While Friday’s price action was likely just healthy profit taking, headlines pointed out some disappointing earnings results and growing COVID-19 cases in Europe and the US weighed on investor sentiment.
The week ahead is dominated by the Fed rate decision and the busiest week of earnings in the US this reporting season (Apple, Microsoft, Tesla, Facebook, Caterpillar). During quarterly earnings season, investor attention usually shifts away from broader macroeconomic issues and back towards company profitability.
Fisher & Paykel Healthcare (FPH:NZX / FPH:ASX)
The big news locally on Friday was a jump in the NZX’s largest stock, FPH, which provided another strong trading update, confirming an acceleration in growth in its third quarter given surging COVID-related hospitalisations.
Fisher and Paykel Healthcare said operating revenue was up +73% in constant currency versus the prior year period, with key driver Hospital (+113%) with strong hardware sales +446% (tracking ahead of expectation) and consumables +54%. Homecare was up +6% and there was no formal guidance looking forward given COVID-19 uncertainties.
It has been difficult to accurately forecast the upside in what has been an extraordinary year, and we expect it to be equally difficult to pre-empt the magnitude and timing of the demand slowdown, driven by the (hopeful) success of vaccine rollouts, starting with high risk groups. We have had a BUY rating on FPH (and maintain this) as a solid healthcare holding for portfolios, as well as a hedge against COVID second wave risks.
Australia & New Zealand Market Movers
The Australian market closed lower on Friday (ASX 200 index -0.3%) but provided gains for the week, following investor enthusiasm for US President Joe Biden’s economic stimulus plan.
A US government funding commitment lifted shares in rare earths producer Lynas sharply higher on Friday, adding to a runaway rally for the stock since October. Lynas shares jumped 13.7% making it one of the best performers over the week, having soared 26% over the five sessions.
The country’s largest superannuation fund, AustralianSuper, could be about to face competition over its bid for Infratil with talk in the market another fund is preparing a rival offer. One suggestion in the market is that it is IFM Investors that is plotting the approach for the New Zealand-based infrastructure company that is listed in Australia.
The New Zealand market (NZX 50 index +1.7%) closed out the week with a strong session. Its gains were mostly driven by a surge in (clean) energy stocks and market darling Fisher & Paykel Healthcare (+5.5%), which provided another strong trading update, confirming an acceleration in growth in its third quarter.
In other stock news, Mercury revised its 2021 operating earnings guidance from $505 to $535m to reflect an expected 200 GWh increase in full year hydro generation and a better forward pricing curve. Oceania Healthcare reported a solid 1st half 2021 result with underlying earnings up 2% to $35.4m, with net profit jumped 67% to $24.8m, due to increased valuations of its properties.
In terms of economic data, a higher than expected 4th quarter inflation (CPI) print of +1.4%, offered no encouragement for the RBNZ to add additional monetary policy.
3 Things Markets will be Watching this Week
- The week ahead is dominated by the busiest week of earnings in the US with 122 S&P 500 companies reporting including: Apple, Microsoft, Tesla, Facebook, Visa, Samsung Electric, J&J, Mastercard, Chevron, McDonald’s and Caterpillar.
- Also in the US, we have the US Fed interest rate decision and release of quarterly GDP figures.
- In Australia, ResMed releases earnings and quarterly production reports are due from Fortescue, Oil Search, Oz Minerals, Origin Energy, Newcrest Mining and Evolution Mining.