Keeping you up to date with the latest market moves, in association with Investment firm Jarden
The NZX closed up 0.5 per cent yesterday, climbing slightly after a move by the government to reduce nationwide covid alert levels at 4:30PM. Auckland has moved down to Level 2 as of Wednesday midnight, with the rest of NZ moving back down to Level 1 at the same time – despite three new community cases from the recent South Auckland cluster.
Sector performance was mixed with reporting season well underway. Large cap stocks Fletcher Building and Ebos filed results yesterday, alongside smaller sized companies NZX and Refining NZ.
Fletcher Building rose 0.8 per cent amidst high trading volumes after it recorded a first half operating earnings of $323 million, exceeding its own guidance of $305 to $315 million which it provided in November last year. A 12 cent per share dividend may also have been a surprise for investors, given Fletchers had last indicated it did not expect to pay any dividends until the second half of the year. Guidance for the full year came in at earnings of $610 to $660 million, a bit higher at the midpoint than consensus estimates of $618 million.
Meanwhile, Ebos dipped 0.2 per cent despite a seemingly solid result. The healthcare company reported a 6 per cent growth in revenue to $4.6 billion, while underlying net profit saw a respectable 14 per cent increase to $94.3 million. Analysts may have been disappointed by the lack of commentary around possible vaccine distribution, seeing that Australian healthcare giant CSL has recently noted it will be responsible for developing 50 million AstraZeneca covid vaccines on Australian shores.
Hallensteins dropped slightly (-0.7 per cent) despite a trading update and profit upgrade, in which the company indicated it had achieved a 13.6 per cent uplift in sales in its first half of the financial year. Profit for the half is expected to be between $19.5 million and $20 million, a possible $4.4 million increase from last year – although growth is flat if we take out the $4.5 million benefit from rental relief and Australian wage subsidies.
The negative stock price movement may have been due to the market having priced in a more positive result – with Hallensteins previously advising the market that sales in the first 18 weeks of the financial year had increased by 14.5 per cent.
Of the non-reporting companies, listed property companies fell with drops in Investore (-1.3 per cent), Vital (-0.9 per cent) and Goodman (-0.5 per cent) amongst others. Gentailers continued to recover with Meridian up 5.5 per cent and Contact up 3.7 per cent. Meanwhile, NZ Herald parent NZME rose another 7.2 per cent to $0.89 a share despite no news to explain the gain.
The government also indicated in yesterday's select committee that it will continue to raise the minimum wage over the next three years, although no quantum was provided. The current minimum wage is $18.90 an hour and will increase to $20 an hour on 1 April 2021.
At the time of writing the S&P 500 was down 0.7 per cent. The Dow Jones was down 0.3 per cent and the Nasdaq was down 1.6 per cent as the technology sector underperformed the market.
Tech was down 0.7 per cent and the worst sector on the day, followed by industrials, down 0.5 per cent. Healthcare and Consumer non-cyclicals were the best performing sectors, up 0.1 per cent each.
Diversified financial services company Wells Fargo was the best performer, up 5.9 per cent. The move came as Federal Reserve officials privately signalled their acceptance of the company's proposal for overhauling risk management and governance. Wells Fargo's balance sheet has been capped at US$1.95 billion since a sales scandal in 2016 drew regulatory ire. With this Fed acceptance, the lifting of the asset cap – which has restricted company growth since 2018 – is a step closer.
At time of writing, the Shenzhen index was up 2.1 per cent and the Shanghai index was up 1.4 per cent.
The consequences of a full decoupling of the American and Chinese economies have been made clear in a repot published by the US chamber of commerce. Such a move would cut US GDP by US$500 million if foreign direct investment in China was halved. By contrast, a 25 per cent tariff on all trade would cut GDP by US$190 million. The report highlights the costs of different policies as President Biden and his team decide what strategy to pursue with China. While not coming out of the gate replicating the previous administrations' belligerence, Biden has been rhetorically strong on China's human rights abuses. For the moment, it is unclear how this strength will sound in policy.
Gold continued to sell off, down 1.25 per cent to US$1771.1 per ounce at time of writing. Those holding gold as an inflation hedge may well be looking to bitcoin, increasingly seen as an alternative hedge, preferring its performance, and making the switch. Bitcoin was up a further 4.7 per cent, trading at US$50893. WTI Crude was up 0.2 per cent, trading at US$60.17 per barrel.
The ASX 200 dipped 0.5 per cent on its close after poor performances in the Consumer Staples, Communications and Healthcare sectors. REIT stocks were also down following a disappointing result from Charter Hall Group, which fell 7.0 per cent after its announcement.
Markets did not seem overly optimistic despite a decision that Victoria's 5-day snap lockdown would end as of Wednesday midnight, after zero new community cases surfaced despite 40,000 tests being conducted. Restrictions on movement have been eased back to last week's limits for the most part, although offices can only operate at up to 50 per cent of capacity - and workers will need to wear masks.
Results have continued to fly in, with supermarket operator Coles, Penfolds brand owner Treasury Wine Estates, and banking giant Westpac of special note.
Coles shares sank 5.4 per cent despite it recording an 8 per cent increase in revenue to A$20.6 billion and a 14.5 per cent uplift in profit to A$560 million. Market watchers may have been concerned by management warnings of a slowing second half for the supermarket sector, amidst unpredictable lockdowns and extended pandemic impacts.
Meanwhile, Treasury Wine Estates rose 2.4 per cent after investors were surprised by its result – with many expecting worse impacts from its recent trade battles with China. Net sales revenue fell by just 8 per cent to A$1.4 billion, although underlying profit fell by 28 per cent. The company announced a 15 cent per share dividend payable 1 April, which although less than the 25 cents it paid last year, may have come as welcome news to shareholders.
Westpac led the financial sector up, gaining 4.6 per cent after reporting a strong result. Cash earnings at A$1.97 billion for the quarter, were up 54 per cent compared to the same quarter last year, while credit impairment charges were a positive at A$501 million (as debts written off were recovered and the impairment reversed), up from -A$470 million. Mortgage deferrals as of 31 January dropped to A$11 billion, well down from the A$55 billion balance we saw at peak.
• For more information on the latest market moves, get in touch with Jarden.
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-disclaimer