Jarden Brief: Threat of inflation pushes US market into red

Investors are becoming increasingly worried about inflation. Photo / Getty Images

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

Coming Up Today:

The US will release CPI numbers which may provide a further data point to feed the growing concern around inflation. CSR (ASX) and Pushpay (NZX) are both scheduled to publish full year results.

New Zealand:

New Zealand equities were in the red yesterday with the S&P/NZX 50 trading down 0.2 per cent to 12,639.2 points at the close.

Sector gains included Industrials and Utilities, each leading the way with 0.5 and 0.3 per cent increases respectively.

Index movements were well supported by the single stock winner Meridian Energy Ltd, which climbed 2.3 per cent. Similarly, Auckland International Airport Ltd rose 2.1 per cent.

On the other hand, markets were weighed down by both the Consumer Non-Cyclicals and Energy sectors which fell 2.8 and 1.4 per cent.

A2 Milk continued to trade poorly following both an earnings downgrade and senior management resignation. Investors are yet to be content with the stock and its future earnings outlook as A2 slid another 6.5 per cent, now trading at $6.20.

Payment service provider Pushpay Holdings Ltd, which slumped to a 5.3 per cent loss ahead of its full-year earnings later today. Featuring in the news, analyst reports questioning whether Pushpay had squandered its opportunity during the pandemic also affected sentiment.

In other news, economic data provided by credit reporting bureau Citrix has shed some light on the New Zealand housing markets' reaction to the series of government measures imposed earlier this year. Demand for mortgages continued at pre-covid rates in April. Many assume this has primarily driven by an increase in first home buyers. Credit card and personal loan spending remained relatively flat from March to April.

Many commentators assume the next quarter will likely reveal if the government's measures have had the desired effect on the New Zealand housing market. So far it is too early to tell.

INTERNATIONAL:
US Markets

At the time of writing, all major US indices were in the red. The S&P 500 fell 0.8 per cent. The NASDAQ decreased 0.1 per cent, and the Dow Jones was down 1.3 per cent. The threat of inflation is becoming more prominent which could lead the Fed to increase interest rates earlier than expected.

All sectors were booking losses, at the time of writing. Energy (-2.3 per cent) declined the most, followed by Industrials (-1.5 per cent) and Financials (-1.4 per cent). Materials and Technology declined the least, down 0.1 and 0.5 per cent, respectively.

The best performing equities included consumer cyber safety business NortonLifeLock Inc (+9.9 per cent), copper, gold and molybdenum miner Freeport-McMoRan (+4.3 per cent), and self-care and wellness solutions provider Perrigo Company PLC (+3.0 per cent).
NortonLifeLock reported its strong fourth quarter results for 2021, which ended on 2 April. The company achieved a record revenue of US$672 million, up 9.0 per cent, and accelerated growth in that period.

The market lagging stocks included activewear apparel manufacturer HanesBrands Inc (-13.1 per cent), oil and gas explorer and producer Occidental Petroleum Corp (-7.5 per cent), and oil and gas explorer and producer Pioneer Natural Resources Co (-5.8 per cent).

On Monday, the Food and Drug Administration (FDA) approved Pfizer and BioNTech's COVID19 vaccines to be administered to children ages 12 to 15 on an emergency use basis. This move is supposed to enable middle-schoolers to be vaccinated before autumn. The Centre for Disease Control and Prevention's vaccine advisory committee is scheduled to meet on Thursday to review the FDA's decision and, if approved, the vaccine rollout to this age group could start this week.

Asian Markets

The popular Asian indices were a mixed bag at time of writing. The Shangahai index (China) was up 0.4 per cent; the Shenzhen index (China) was up 0.4 per cent; the Nikkei 225 (Japan) was down 3.1 per cent; and the Hang Seng (Hong Kong) index was down 2.0 per cent.

On Tuesday, China reported that consumer prices increased by 0.9 per cent and the producer price index rose 6.8 per cent in April.

Additionally, China released its census results. The seventh national census showed that the average annual population growth rate was 0.53 per cent over the past ten years. A decrease of 0.04 per cent compared to its last census in 2010. China's mainland population is recorded to be 1.41 billion people as of 1 November 2020. Births declined a further 15 per cent in 2020, continuing a four-year downward trend.

Commodities

Gold was trading at US$1,835.80 per ounce (-0.1 per cent), at the time of writing; while Silver was trading at US$27.68 per ounce (+0.7 per cent). Copper made the biggest gains, increasing 1.7 per cent to US$4.80.

The closest dated WTI oil future was trading at US$65.28 (+0.5 per cent), while Brent rose 0.3 per cent to US$68.52.

Cryptocurrencies were in the green, with Bitcoin increasing 0.6 per cent and Ethereum rising 0.3 per cent.

The 10-year US treasury yield was fairly unchanged at 1.624 per cent.

Australian Markets:

The ASX200 went red yesterday after setting a new 52-week high, falling 1.1 per cent. In a reverse from Monday, ten of 11 sectors closed lower. This fall was led by Information

Technology, down 4.2 per cent, and Energy, down 2.7 per cent.

The only sector to rise was Consumer Staples, which rose 0.3 per cent.

The biggest outperformer was legal services provider Omni Bridgeway which rose 4.3 per cent, following a 9.0 per cent rise on Monday. This came following Monday's news of AUS$94 million to be received from a class action.

Building materials giant Boral was another strong performer, up 3.4 per cent.
Buy now pay later provider Zip was the worst performer of the ASX200 yesterday, falling 9.1 per cent. AfterPay fell 8.7 per cent in sympathy. The falls in these stocks represent a broader market trend of a pivot away from high growth technology stocks. This was evidenced by a 4.2 per cent decline in the Information Technology sector yesterday.
Australia's federal Court has rejected the bid to overturn the travel ban, in line with advice from the Health Minister. The 9500 Australians in India will be unable to return until it is lifted on Friday while the Covid situation in India continues to decline.

The Australia Federal Budget was released last night. It detailed the extension of tax cuts for a year for low and middle-income families, AUS$1.9 billion over five years for a vaccine programme and an AUS$17.7 billion aged care package. The market reaction to this budget should be seen in markets today.

• 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-disclaimera>