Global markets were mixed on Friday, with the US market (S&P 500 index +0.15%) eking out a small gain, to end a volatile week in the green.
Most cyclical and technology sectors rose, while the more rate sensitive healthcare, real estate and utility sectors ended in the red after US 10-year Treasury bond yields rose to 1.45%. In stock news, Nike shares fell -6.2% after the sneaker giant lowered its near-term outlook because of a prolonged production shutdown in Vietnam, labour shortages, and lengthy supply chain constraints and disruptions which will result in full-year sales to rise at a mid-single-digit pace, compared to low double-digit growth it previously forecast.
The big news last week was Evergrande, and a domino effect for financial markets globally seems to be avoided for now. The Financial Times is reporting at least two local governments in China have taken control of sales revenue from Evergrande properties. The moves mark an escalating effort to curb the impact of Evergrande’s debt crisis. The company itself is so far staying silent with a 30 day grace period before it technically defaults.
Also in China, industry crackdowns continued – this time on Bitcoin over the weekend. A crackdown on bitcoin by China hurt market sentiment with Bitcoin dipping -8%, and technology shares that depend on crypto-related revenue falling – such as Riot Blockchain (-5.0%), Marathon Digital (-4.0%) and Coinbase (-2.4%).
European Markets were lower Friday (Stoxx 600 index -0.9%) as investors worried about the ability of China’s Evergrande Group to pay back its debt, despite ECB saying Europe has limited direct exposure to the property giant.
Pacific Edge (PEB:NZX)
Bladder cancer diagnostic company Pacific Edge shares jumped +6% on Friday, after exiting its trading halt – raising $80m of fresh capital from institutional investors at $1.35 per share as it is set to list on the ASX today. The $80m capital was above the $60m it had planned to raise due to strong demand. This brought their cash balance to $96m allowing adequate funding for ~6 years based on PEB's current cash burn rate – which is likely to decrease as revenue starts to ramp up.
Since our initiation report on Pacific Edge in May this year its shares have risen +35%.
We still believe it is still a relatively early time to invest, and PEB’s market capitalisation of $1.1 billion is still relatively small for a healthcare company given their ambitious targets in the US market. We see upside potential from Pacific Edge meeting its US revenue targets and with positive cashflow over the near-term and plenty of cash on hand it should help boost the research and development of its other cancer diagnostic products such as – gastric, colorectal, and endometrial cancers and melanoma.
We remain BUY rated.
Australia & New Zealand Market Movers
The Australian market was down on Friday (ASX 200 index -0.4%) ending a volatile week lower, as volatile commodity prices tested investor nerves.
Energy stocks were strong following optimism over the global economy, while concerns in China were still not ironed out causing weakness across the major miners.
Premier Investments jumped +5.5% after at least seven brokers raised their target prices on the stock following tis strong earnings result.
The New Zealand market was also down on Friday (NZX 50 index, -0.4%).
Despite most stocks trading higher, the market was weighed down Fisher and Paykel falling -3.1%, as well as a couple of other large constituents trading weaker with Contact down -1.2%, and Spark slipping -0.7%.
Fonterra rose another +1.3% following a strong Thursday, while A2 Milk made some positive ground after touching 4-month low on Tuesday.
Interestingly Briscoe Group CEO was in the press highlighting Auckland’s move to level 3 lockdown last week caused an “explosion” of orders for Briscoes and Rebel Sports.
3 Things Markets will be Watching this Week
- After an eventful week for China last week, there is likely to be more focus on the latest Chinese PMI (manufacturing) data this week
- Locally, latest ANZ Business and Consumer Confidence data in NZ will be released
- Locally, financial results from Synlait Milk and NZ King Slamon, and AGM’S held by the ASX, Vector and Steel & Tube.