Global markets were mixed on Friday, with the US market (S&P 500 index +0.2%) eking out a gain as investors digested mixed earnings results and bond yield rising globally.
There were mixed fortunes for markets over October. The NZ market lost -1.3% as its underperformance versus global peers continues, sentiment hit by the RBNZ hiking interest rates as we remain one of the most locked down & restricted countries in OECD. In contrast, US S&P 500 index gained +6.9%, led by tech names such as Tesla and Microsoft. Across the Tasman, the ASX rebounded +1.7% after selling off in September.
On Friday, Amazon (-2.2%) and Apple (-1.8%) both fell after missing revenue expectations, and it was Apple’s first revenue miss since May 2017 on the back of larger than expected supply constraints on iPhones, iPads and Macs.
Other tech stocks were higher, to offset losses. Microsoft was up +2.2% and surpassed Apple as the largest listed company in the world by market cap. Starbucks dropped -6.3% after the coffee chain guided to operating margins below expectations. Exxon Mobil (+0.3%) and Chevron (+1.2%) were higher after rising oil prices helped boost quarterly profits. The FDA gave emergency use authorisation for Pfizer's (+1.3%) and BioNTech's (-1.8%) covid-19 vaccine for 5–11 year olds.
About half of the S&P 500 have reported quarterly results and more than 80% of them beat earnings estimates from Wall Street analysts – fueling the current rally.
European Markets (Stoxx 600 index, +0.06%) was flat on Friday digesting a mixed result and rising bond yields bring utility stocks lower.
For the week ahead, key events this week include central bank announcements from the Reserve Bank of Australia, US Fed, and Bank of England. US Third quarter Earnings continues with Pizfer, T-Mobile, Uber, and Lyft among those reporting this week. Locally, we see earnings from Westpac, Goodman Group, Amcor and Z Energy, and quarterly updates from and AGM’s being held by Worley, Domino’s Pizza, Qantas, Spark NZ and Precinct Properties.
Macquarie Group (MQG:ASX)
Macquarie delivered a solid result for the first half of the 2022 financial year with net profit after tax coming in at $2,043m, double its figure last year. This was driven by the Macquarie Capital business which delivered a net profit contribution of $468m, up from a loss in the previous year. With strong growth across all business segments it compared very well to the same corresponding period which was heavily impacted by the peak of the covid-19 pandemic.
Macquarie was put into a trading halt as it is undertakes a non-underwritten institutional placement aiming to raise approximately $1.5 billion of fresh capital, following the bank seeing a strong pipeline of opportunities (having deployed $5.5 billion of capital over the last 12 months) – the funds used to provide additional flexibility to invest in new opportunities.
CEO Ms Wikramanayake said: “Macquarie remains well-positioned to deliver superior performance in the medium term. This is due to our deep expertise in major markets; strength in business and geographic diversity and ability to adapt the portfolio mix to changing market conditions; an ongoing program to identify cost saving initiatives and efficiency; a strong and conservative balance sheet; and a proven risk management framework and culture.”
We have always had a positive view on Macquarie in terms of it continuing to grow its profits but at the current juncture we believe the valuation is stretched, trading at a forward Price to Earnings multiple of ~21x and offering a dividend yield of ~2.8%. We continue to HOLD Macquarie in our Australian portfolio, but would prefer to BUY the stock at more attractive valuation multiples.
Australia & New Zealand Market Movers
The Australian market was down on Friday (ASX 200 index -1.4%), as surging bond yields indicated market expectations are that inflation would force the Reserve Bank to tighten monetary policy sooner than it has indicated.
Loses were across most of the market, Real estate and Utilities hardest hit being most sensitive to rate hikes, while lower commodity prices dragged down energy and mining companies.
Healthcare stocks fared better ending the session flat, despite ResMed jumping +4.2% after reporting a +20% uptick in sales for the September quarter.
The New Zealand market was up on Friday (NZX 50 index, +1.0%) in a broad based rally as investor rebalanced their portfolio for the end of the month. Pushpay (+3.8%), A2 Milk (+3.5%), and Air NZ (+3.11%) led the market higher on a high volume day with limited news flow.
Move logistics jumped +7.4% after the transport company issued 13 million shares at an 8-cent premium to its asking price of $1.40.
3 Things Markets will be Watching this Week
- Key events this week include RBA announcement, Fed meeting this week, Bank of England announcement, and employment data (nonfarm payrolls) in the U.S.
- US Third quarter Earnings continues with Pizfer, T-Mobile, Uber, and Lyft among those reporting this week
- Locally, earnings from Westpac, Goodman Group, Amcor and Z Energy, quarterly updates from and AGM’s being held by Worley, Domino’s Pizza, Qantas, Spark NZ and Precinct Properties.