Global markets finished the week on a positive note Friday, as US markets (S&P 500 +0.2%) closed at record highs following mixed economic data – with investors becoming less concerned around inflation fears.
Consumer Staples and utilities led the market higher, while the energy and financial sectors were in the red. Disney shares were up +1% after delivering a solid quarterly result, with Disney+ subscriber numbers beating estimates coming in at a huge 116m.
European stocks were higher on Friday with the Stoxx 600 index up +0.2% posting its 10th consecutive gain. Adidas shares jumped +2.3% after announcing it sold its Reebok business for $2.5 billion in order to focus on its core brand. Ipsen shares slumped -12.7% as the French pharmaceutical company withdrew a new drug application in the US.
Closer to Home, RBNZ will announce their interest rate decision on Wednesday – where the market has fully priced in a 25 basis point increase for this week and economist predicting 2 further hikes by the end of the year (reversing the 0.75% emergency cut made last year in the peak of the pandemic). The NZ 10-year Treasury yield trading at 1.75%, well ahead of global peers, US 10-year Treasury yield at 1.28%, and Australian 10-year Treasury yield at 1.17%.
Telco giant Telstra (TLS) shares were up last week after delivering a well-received results for the 2021 financial year – considering the impacts of covid-19.
Operating earnings was weaker reflecting peak impact of NBN headwinds, which management said would begin to ease significantly from 2022 onwards and that the company would return back to growth, with further increases in earnings and dividends guided for 2023.
Telstra also unveiled a $1.35 billion share buyback, which is roughly equivalent to half of the proceeds from selling a stake in its mobile phone tower network earlier this year.
We remain BUY rated on Telstra as it offers investors a 4.3% dividend (which is attractive in the current market) plus there is added upside from share buybacks and ongoing earnings accretive benefits from sales going forward and underlying business growth from here on out as the telco continues to turn itself around after years of under-performance.
Australia & New Zealand Market Movers
The Australian market finished strongly on Friday (ASX 200 index +0.5%) amidst a strong week of earnings results.
Healthcare shares led the market higher, with CSL climbing +2.4% recovering from heavy losses mid-way through the week. While consumer discretionary and financials continue to perform strongly.
It is believed Woodside Petroleum could buy BHP’s petroleum assets, in the form of a $40 billion asset merger.
The New Zealand market was up on Friday (NZX 50 index, +0.7%) reversing most of the losses from the previous session as investors were less wary of upcoming RBNZ interest rate decision due this Wednesday.
Fisher and Paykel Healthcare rose +2.4%, after a rough few sessions, with Sky City (+2.2%) experienced a similar recovery.
Air NZ managed to edge up +1% after announcing its much anticipated capital raise will be delayed until early 2022, and that the planned 1% increase in interest on debt issued by the NZ government would be cancelled. This decision reflects the Government’s view that the current environment is insufficiently stable to provide a firm pre-commitment, though it reiterated a commitment to maintain its majority shareholding
Takeover rumours are floating around A2 Milk, and that potential suitors Nestle and Kirin will be keeping a close eye on A2 Milk’s result – who have previously looked at A2 Milk at the past but the price was too high to make an offer.
3 Things Markets will be Watching this Week
- Key events this week include the RBNZ meeting where a 25-basis point hike is fully priced in and expected by the market.
- Locally Earnings season kicks into full gear. Major names include JB Hi-Fi, Contact Energy, BHP, Aristocrat, Coles, CSL, Oz Mineral, Woodside, EBOS, Fletcher Building, Spark, Auckland Airport, Sydney Airport – and quarterly updates from ANZ and Westpac.
- Economic data from China, US Fed minutes and employment data in Australia.