Jarden Brief: Costco and Walmart surge in US amid signs inflation has peaked

New Zealand's first Costco store in Westgate, Auckland. The company's US operator enjoyed a sector rally overnight.

Keeping you up to date with the latest market moves, in association with Investment firm Jarden.

International

US

Markets rallied on inflation optimism, with the S&P 500 up 1.3 per cent and the Nasdaq gaining 2.2 per cent.

The Producer Price Index (PPI), a measure of the inflation that suppliers are facing, rose 0.2 per cent in October, 20 basis points lower than market expectations.

The smaller than expected PPI print is now the second consecutive data point supporting a bull argument on inflation (that it may be reaching its peak). It followed last week’s Consumer Price Index data release, which also drove a strong rally in equities.

Consumer staples stocks such as Target (+3.0 per cent) and Costco (+3.4 per cent) rose with Walmart (+7.2 per cent) driving a sector rally, raising its earnings guidance and safely beating market expectations on its outlook.

Home improvement retailer Home Depot also beat earnings expectations, but reaffirmed guidance.

Media production company Paramount Global gained 10.1 per cent after regulatory filings showed that Warren Buffet’s Berkshire Hathaway had increased its equity position in the company, and was now the largest individual shareholder in the company - owning 15 per cent of the company’s Class B shares.

Rest of World

European stocks advanced a fourth day, with the German DAX index gaining another 0.5 per cent and now entering into a technical bull market.

All eyes were on the G20 summit, notably the relationship between China and the US. A three-hour meeting between US President Joe Biden and China President Xi Jinping drove optimism for the semiconductor industry, which has been hit with recent controls as a casualty of the two countries’ trade war.

Following the meeting, Biden said there would be “no new cold war with China”.

AMD added 6.5 per cent, and Nvidia gained 3.0 per cent. Taiwan Semiconductors was up 7.9 per cent, also bolstered by news that Berkshire Hathaway had opened a new equity position in it.

Commodities

Cryptocurrencies made a slight recovery rally following last week’s FTX collapse, with Bitcoin up 3.8 per cent to US$17,011 per coin and Ethereum gaining 3.4 per cent to US$1,267 per coin.

The digital currencies were bolstered by reports ARK Investment Funds leader Cathie Woods had continued to increase holdings in cryptocurrencies despite wider fears around the sector’s stability.

Oil continued to trade higher, to US$93.90 per barrel with optimism around potential pandemic reopening steps in China continuing to outweigh a slimmer demand outlook from OPEC.

Australia

Banking giant Commonwealth Bank grew its third quarter cash profit by roughly 2 per cent compared with its prior quarter, impacted by modestly higher core costs and lower non-interest income.

In the bank’s commentary, CEO Matt Comyn called out energy and wage inflation as being the main concerns for business loans, as well as predicting that the housing market would ‘continue to soften’.

Limited surprises were seen from the RBA meeting minutes, with continued commentary from the central bank that it expects to increase rates - albeit it remains flexible in its approach given future rate rises will be dependent on the outlook for economic activity.

New Zealand

Sanford reported a full year result received neutrally by the market, with operating income of NZ$40 million and revenue of NZ$532 million, which were both broadly in line with market expectations.

Following the sale of its crayfish quota earlier in the year, the seafood company declared its first dividend in more than two years, with a 10 cent dividend payable on 9 December.

Infrastructure holding company Infratil’s result was also in line with market expectations, with the company’s CEO Jason Boyes highlighting ‘pleasing’ growth in operating revenues and proportionate operating earnings up to NZ$276 million.

The company highlighted that 58 per cent of its company was now held in digital assets, with notable subsidiaries including telco operator Vodafone NZ as well as key growth driver Canberra Data Centres.

Coming up today

Coming up later today will be NZX-listed healthcare company EBOS Group’s investor day, which it will hold in in-person in Melbourne. Contact Energy and KMD Brands (parent company of Kathmandu and Rip Curl) will also be holding annual general meetings.

Several companies will also be reporting full year earnings on both sides of the Tasman. Notable companies include gambling machine manufacturer Aristocrat Leisure, commodity trading company GrainCorp, and Napier Port.

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All market pricing and announcements are sourced from Refinitiv, NZX and ASX.

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