Inflation predictions keep rising. Photo / Getty Images
Keeping you up to date with the latest market moves, in association with Investment firm Jarden
New Zealand
The NZX50 retreated by 0.9 per cent on Wednesday.
Energy and financial stocks were the only two sectors booking gains, up 0.8 and 0.3 per cent, respectively. The worst performing sectors were technology (-1.6 per cent) and consumer non-cyclical stocks (-1.5 per cent).
Yesterday's best performing stock was Scales Corporation, increasing 2.1 per cent. The pet food and horticulture business recovered its losses from Tuesday's trading after it announced that the company will no longer pursue the purchase of winemaker Villa Maria.
Kathmandu was another strong performer on the day, rising 1.3 per cent. The outdoor retailer also recovered losses from the previous day.
In third place was cinema software provider, Vista Group International, up 1.3 per cent. Due to the easing of social restrictions around the world, the movie industry has begun to pick back up.
On the flip side, Tourism Holdings fell 3.1 per cent as the worst performer.
Telecommunications provider, Chorus, was in the bottom three for a second day in a row, decreasing 3.0 per cent.
Rounding out the worst performers was Fonterra Shareholders' Fund (-3.0 per cent), with some negative market sentiment potentially following the 1.3 per cent decline of the Global Dairy Trade Price Index – despite this not necessarily being a negative result for shareholders.
Yesterday, the Reserve Bank released a statement that it had added debt serviceability restrictions to its policy toolkit. An analysis of the matter, requested by the Minister of Finance in February, showed that tools like a Debt-to-Income (DTI) limit would be most effective to support financial stability and house price sustainability.
The impact will be mostly felt by investors. The Minister of Finance is concerned about the impact on first home buyers and will ensure that the new Memorandum of Understanding sets out to limit that impact as much as possible.
INTERNATIONAL
US
The US markets dropped into the red overnight following the release of the Federal Reserve's policy meeting result. While the Federal Reserve held the Fed Rate at zero, it raised headline inflation expectations in the US to 3.4 per cent, 1 per cent higher than the expectation in the March meeting, and will increase the Fed Rate earlier than expected in 2023 not 2024.
No comments were made on potential changes to the currently aggressive bond buying programme. Comments supporting the view that the current inflationary environment is "transitory" were made, which indicates the Federal Reserve thinks that this will be passed in time and the price increases will not be sustained in the long-term.
The S&P 500 was down 0.6 per cent, the Nasdaq had fallen 0.5 per cent and the Dow Jones Industrial Average was down 0.7 per cent.
Ten of eleven sectors declined following the announcement. The worst performing sectors were consumer staples and utilities, falling 1.2 and 1.0 per cent, respectively.
The only sector in the green was financials, up 0.2 per cent. A higher Fed Rate creates a more favourable macro-economic climate for banks.
Enphase Energy rose 4.5 per cent and was the top performer of the S&P500 at the time of writing. These gains for the energy management solutions company could be linked to improving popularity for solar.
Centene rose 4.8 per cent as another outperformer, rising 4.8 per cent and reaching a new 52-week high. The healthcare company released forecasts at an investor day today. Adjusted earnings per share of between US$5.05 to US$5.35 for 2022 was within analyst forecasts, which was favourably received by investors.
The underperformer at the time of writing was virtual reality company, Oracle, which had fallen 5.9 per cent. During an earnings call, Oracle released first quarter 2022 earnings per share guidance of US$0.98 - missing the US$1.03 expected by Wall Street.
Take-Two Interactive Software fell 4.8 per cent. The gaming and entertainment developer owns a stake in OneTeam (a licensing and player arm for the American Football League), in which one of the co-owners, Redbird Capital, wants to offload its 40 per cent stake.
Finally, in some lighter market news, Cristiano Ronaldo wiped US$4 billion off the business value of Coca-Cola following a Euros press conference where he took the sponsored drink, removed it from the table and commented "drink water".
Asia
Of the Asian indices, the Shanghai Composite fell 1.1 per cent, the Hang Seng fell 0.7 per cent and the Nikkei rose 0.5 per cent.
Today's trading day for the Asian indices will likely show a market reaction to the Fed announcement, which came out after trading closed.
Commodities
Gold fell 0.3 per cent to US$1,850.80 per ounce.
Crypto currency lost yesterday's gains overnight. Notably, Bitcoin fell 3.5 per cent and Ethereum fell 5.3 per cent.
The US-10 year bond currently yields 1.536 per cent, around 40 basis points higher following the Fed announcement.
The oil price fell 0.3 per cent, still trading high at US$71.94.
Australia
Australian equities were up slightly yesterday, with the S&P/ASX 200 finishing 0.1 per cent higher at 7386.2 points on yesterday's close.
The continued easing of Melbourne's lockdown restrictions was also a positive sign for the wider Australian economy. Residents are no longer limited to a 25km travel zone, while cafes, bars and other businesses will benefit from relaxed capacity constraints.
Sector gains included energy and financials, each leading the way with 1.5 and 0.8 per cent increases, respectively.
Overall index movements were well supported by top performing stock Pro Medicus, which advanced 3.6 per cent. Similarly, real estate and development company, Ingenia Communities Group, traded favourably (+2.9 per cent) to continue a solid run for the stock in line with the wider post covid recovery trend.
On the other hand, markets were weighed down by both the basic materials and academic & educational services sectors, which fell 1.4 and 0.2 per cent respectively.
Copper miner, OZ Minerals, was the day's largest underperformer, down 6.7 per cent. Investors reacted to news that China may be releasing some of its copper stockpile into the market, potentially decreasing global copper prices and OZ Minerals' revenue.
Lastly, technology company, Nuix, continues to be volatile as it finished one of Wednesday's worst-performing stocks. It announced on Tuesday that both the CEO and
CFO will soon depart, as the company undertakes a significant restructuring. The market had originally reacted positively to the news on Tuesday, but ultimately dropped 5.8 per cent to wipe out its earlier gains.
Coming up Today:
New Zealand's first-quarter GDP is set to be released today, covering the first quarter of 2021. The print will determine whether we will return to technical recession, defined as two quarters in a row where GDP growth is negative. Last quarter, our GDP shrank by 1 per cent on the previous quarter, or -2.9 per cent on an annual basis.
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Disclaimer: This Morning Brief has been prepared in good faith and reflects opinions and views at the time of publication, using external sources, systems and other data and information we believe to be accurate, complete and reliable at the time of preparation. We make no representation or warranty as to the accuracy, correctness and completeness of that information, and will not be liable or responsible for any error or omission. This Morning Brief is not to be relied upon as a basis for making any investment decision. Please seek specific investment advice before making any investment decision. Jarden Securities Limited is an NZX Firm, a broker disclosure statement is available free of charge at www.jarden.co.nz. Jarden is not a registered bank in New Zealand. Full disclaimer available at: https://www.jarden.co.nz/limitations-and-disclaimera>
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