Global markets were lower on Friday, US markets (S&P 500 index -0.7%) as stocks fell, while bonds climbed at the end of a week marked by tension between the West and Russia and worries about the Federal Reserve’s next policy steps. The U.S. said Russia has amassed as many as 190,000 personnel in and around Ukraine, calling it the most-significant military mobilisation since World War II although Russia continues to say it has no plans to attack.
All sectors were down except for consumer staples, and technology stocks were once again the biggest losers as investors are taking a risk off approach in the current climate.
In stock news, Roku shares crashed -22.3% after the video-streaming company reported a revenue miss and issued weaker-than-expected guidance. DraftKings (-21.6%) and Shake Shack (-4.1%) also dropped after both provided disappointing outlook. Intel fell -5.3% after stating that investors should expect muted profit margins, not helping investors concerned about the loss in market share the chipmaker has endured.
European markets were also lower (Stoxx 600 index -0.7%), with travel and leisure stocks leading losses, while mining stocks bucked the trend reporting a modest gain. Markets have been very volatile this year, and we think this current level of volatility will persist over the near-term, especially with the upcoming Fed decision in March and geopolitical situation between Russia & Ukraine.
Closer to home, the RBNZ will make their much-anticipated OCR decision on Wednesday, with 0.25% interest rate hike to 1.00% the most likely outcome, while a +0.5% would be more of a surprise. Local earnings are now in full-steam, with 1/3 of Australian stocks having already reported so far, this week being the busiest in the local earnings season, with below stocks being highlights:
Monday: A2 Milk, Freightways, Chorus, Costa Group, NIB Holdings, and Pilbara minerals.
Tuesday: Heartland Bank, Mercury Energy, Meridian Energy, and Coles Group.
Wednesday: NZ Refining, Precinct Property, Spark, Woolworths, Wisetech Global, Rio Tinto, Blackmores, and Next DC.
Thursday: Auckland International Airport, Air NZ, Scales Corp, Sky TV, Summerset, Ardent Leisure, Qantas, Appen, and Zip.
Friday: Delegat, Tourism Holdings, Vector, Brambles, Harvey Norman, and Bubs Australia.
QBE Insurance (QBE:ASX)
QBE Insurance slumped -8.7% Friday, after its result disappointed falling short of market expectations, despite being well ahead of the 2020 covid ridden result, as well as the 2018 and 2019 annual result.
Gross Written premium came in at US$18.5 billion, which was up +25.7% driven by strong premium rate environment and improved customer retention and new business growth across all regions. Statutory net profit after tax of US$750m compared to a massive loss of $1.5 billion in the previous year and final dividend of 19 Australian cents per shares – both strong but missed the markets higher expectations.
QBE also announced a conservative guidance for 2022 due to rise in elevated natural catastrophe’s and adjustments for inflation. We are still BUY rated on QBE, as it will benefit from the current trend of rising interest rates (improving its investment income) and healthy insurance premium rate growth environment.
Australia & New Zealand Market Movers
The Australian market was down yesterday (ASX200 index -1.0%), on mixed earnings results and Russia and Ukraine tensions adding to the downward pressure across most of the market with all sectors in the red.
Inghams slipped -5.1%, after stating omicron will take ~$24m of their profit. Origin Energy tumbled -8.3% following its announcement to bring forward its plans to shut its coal plant by 7 years to 2025.
Gold miners managed to post some gains as the price of the precious metals rose to above US$1900 per ounce.
Bucking the trend, Magellan shares surged +18.5%, partially recovering from its heavy sell off this year after delivering a +24% increase in its first half profit.
The New Zealand market (NZX 50 index -0.9%) was down on Friday following global market jitters focused on Russia and Ukraine.
Growth, technology and covid sensitive stocks were hit hard again, Plexure Group (-6.3%) Pacific Edge (-4.6%), Oceania Healthcare (-3.6%), and Fisher and Paykel (-2.3%).
Sky TV rose +3.6% after signing a six-year deal to for English Premier League football rights in NZ.
3 Things Markets will be Watching this Week
- Geopolitical Risks – Russia/Ukraine
- US housing data, and CPI (inflation) data from Eurozone. The RBNZ makes an interest rate decision.
- Local earnings with its busiest week, A2 Milk, Costa, Heartland Bank, Woolworths, Rio Tinto, Wisetech, Air NZ, Scales Corp, Summerset, Qantas, Delegat, Harvey Norman and Tourism Holdings reporting.