Global markets were mixed on Friday, as US markets (S&P 500 index +1.0%) charged higher despite inflation hitting a 39-year high, to close out the best week for Wall Street since February.
US CPI (inflation) rose +6.8% year on year, its highest level since 1982, and core inflation (which excludes food and energy prices) jumped +4.9% year on year or +0.5% month on month. While a high figure, investors had been fearing worse. Bright spots in the data was increases in used cars, lodging, and airfares which were all lower than expected. Inflation moves have been closely watched by investors given higher inflation implies higher interest rates.
All sectors were higher, with the interest rate sensitive Financial sector lagging (as banks usually benefit from higher interest rates). Oracle shares soared 15.6% on Friday, after the company posted better-than-expected quarterly results and increased its outlook for the upcoming quarter.
European Markets (Stoxx 600 index -0.3%) were lower as covid concerns and US inflation data weighed down on the market.
It is a busy week ahead this week, with an interest rate decision from the US Federal Reserve, European Central Bank and Bank of England. There will also be Inflation data releases from the Eurozone and UK, and a raft of housing data from the US. Locally, Australia’s employment data and NZ‘s third quarter economic growth (GDP) figures are released.
Tourism Holdings (THL:NZX)
Tourism Holdings rose +6% on Friday after announcing it would acquire its competitor ASX listed Apollo Tourism and Leisure.
Apollo is a leading Australian RV company with operations in Australia, New Zealand, North America, Germany, the United Kingdom and Ireland. THL owill ffer Apollo fresh THL shares, issuing 25% ownership of THL resulting in a transaction value of ~$143m. The deal is subject to approval from Apollo shareholders and the competition agency both in Australia and New Zealand.
The deal has a number of benefits including consolidating the two largest RV businesses in Australia and New Zealand to realise significant cost synergy’s (mainly fixed costs), earnings accretion, better capital efficiency of their fleet and for THL to gain exposure into Canadian and European market.
We remain BUY rated on THL, as we see it as best value tourism play on the market. The acquisition of Apollo looks good, but is not a done deal with the competition regulator being the main hurdle to pass.
Australia & New Zealand Market Movers
The Australian market was down on Friday (ASX 200 index -0.4%) in anticipation of US inflation data, but ended the week up +1.5% ending four consecutive weeks of losses.
Healthcare sector led losses, CSL falling -2% as it rushes to complete the $10 billion takeover of Vifor Pharma and prepares for a potential ~$4 billion capital raise.
Energy and Material stocks were lower as commodity prices dipped over fears of economic uncertainty in China as Evergrande finally defaulted on its debts.
Technology stocks were also weaker, taking NASDAQ’s weak lead Afterpay closing -4.4% lower as buy now pay later sector face more intensive regulatory pressure.
The New Zealand market was up on Friday (NZX 50 index +0.6%) on solid takeover news.
EBOS out of its trading halt, successfully raised $674m from institutional investors to help fund the $1.2 billion LifeHealthcare business, the stock rising +5.5% to fresh all-time highs.
While the remainder of the market were a little timid in anticipation of US inflation data, stocks that sold off heavily over the last month or so were a tad stronger; Spark (+2.6%), Kiwi Property Group (+2.6%), Oceania (+1.5%), and Pacific Edge (+1.5%).
3 Things Markets will be Watching this Week
- A busy week ahead with an interest rate decision from the US Federal Reserve, European Central Bank and Bank of England. Inflation data from the Eurozone and UK, and a raft of housing data from the US.
- Locally, Australia’s employment data and NZ‘s third quarter GDP.
- AGM’s held by Westpac, ANZ, NAB and Nufarm.