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Market Summary
The New Zealand sharemarket continued to lose ground yesterday as stocks were still boxed in by high interest rates and modest earnings expectations. By the close, the S&P/NZX50 index was at 10,884.040, down 76.583 points, or 0.7%. Turnover, worth $111.76 million, was moderate, and there were 78 falls and 48 rises among the 185 stocks traded on the main board.The market dropped 4.2% in August, 2.2% in September and has fallen by 3.6% so far this month. A higher-than-expected 1.2% increase in Australian consumer price inflation for the September quarter is starting to solidify expectations of a Melbourne Cup day (Nov 7) rate hike from the Reserve Bank of Australia (RBA). The RBA’s rate currently sits at 4.1%. Skellerup Industries fell 2c to $4.73 despite providing an upbeat earnings guidance for 2024. Shareholders at the company’s annual meeting were told that the first quarter’s results were mixed. Skellerup nevertheless expects its 2024 net profit to be in a range of $50m to $55m compared to last year’s record profit of $50.9m. Rural services group PGG Wrightson fell 8c to $3.47 after forecasting an operating Ebitda result for the June year of around $52m, down from $61.2m in the previous year. The company said the medium to long-term sector fundamentals were still strong, but that its earnings would drop based on its assessment of a more challenging operating environment. Demand in key export markets had declined and China’s economic recovery remained subdued, the company said. Debt-laden Synlait Milk, which on Monday announced the sudden resignation of Simon Robertson as chair and as an independent director of the company fell by 7c to $1.26. Synlait has put its Dairyworks business up for sale. Restaurant Brands rallied by 18c or 4.8% after reporting to the market that its sales for the third quarter came to $340.9m, up $18.8m or 5.8% over the equivalent period last year. The fast food brands company said the gain reflected ongoing recovery from the impacts of the 2022 Covid-19 Omicron outbreak and the price increases that were implemented across all markets. In the lower cap stocks, Move Logistics gained 1c to 61c. The company’s shareholders were told at the annual meeting that first half operating conditions had been tougher and for longer than anticipated - high inflation and interest rates dampening customer demand, and increased competitive pricing pressure. Source: Business Desk |
Australian Market Report
Ahead of the local open SPI futures were 32 points lower at 6805.
Wednesday 25 October 2023 - close [Morningstar with AAP]: The Australian share market has given up its modest gains and closed basically flat after a hotter-than-expected third-quarter inflation readout increased the odds of another rate hike next month.
The benchmark S&P/ASX200 index on Wednesday finished down 2.6 points, or 0.04 per cent, to 6,854.3, while the broader All Ordinaries rose 0.7 points to 7,046.3.
The market had been up as much as 0.5 per cent in early trading but fell into the red after the Australian Bureau of Statistics announced that consumer prices rose 1.2 per cent in the three months to September 30, with annual inflation coming in at 5.4 per cent.
Consensus forecasts had been for a 1.1 per cent quarterly lift and annual inflation softening to 5.3 per cent.
Following the readout, economists with Commonwealth Bank, Barclays Bank, AMP, ANZ, NAB, Betashares, Rabobank and the Royal Bank of Canada all separately predicted that the Reserve Bank would raise the cash rate to 4.35 per cent on November 7, Melbourne Cup Day.
RBA governor Michelle Bullock said Tuesday night that the board would "not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation," NAB senior economist Taylor Nugent noted, and it was hard not to see Wednesday's report not meeting that bar.
The Australian dollar rose to a nearly two-week high against its US counterpart after the readout, on the expectations that rates would increase.
Just two of the ASX's 11 sectors finished in the green, but one was the heavyweight mining space, which rose 1.6 per cent as Beijing unveiled fresh fiscal stimulus measures to support construction and disaster relief.
BHP climbed 2.6 per cent to $44.72, Fortescue added 3.1 per cent to $22.02 and Rio Tinto gained 2.4 per cent to $116.27.
All the Big Four banks were lower, with CBA down 0.7 per cent to $97.35, ANZ falling 1.3 per cent to $24.85, Westpac dropping 0.4 per cent to $20.80 and NAB retreating 0.8 per cent to $28.32.
Woolworths dropped 2.0 per cent to $35.63 as the supermarket giant said sales were up 5.3 per cent for the 14 weeks to October 1 as fruit and vegetable and meat prices continued to fall.
Big W sales were down 5.8 per cent, however, with customers continuing to be cautious and trade down within categories, chief executive Brad Banducci said.
Corporate Travel Management gained 3.2 per cent to $17 and Flight Centre rose 3.5 per cent to $18.42 after the former announced a $100 million share buyback program, with CTM chairman Ewen Crouch telling the company's annual meeting that it sees a growing appetite for corporate travel.
The post-pandemic recovery in aviation also boosted Ampol, which grew 3.8 per cent to $32.94 as the petrol station owner said strong jet fuel sales had helped boost third-quarter earnings by 65 per cent to $438.2 million.
Dexus dropped 3.3 per cent to $6.70 as the office tower owner announced Darren Steinberg would step down as chief executive next year, after 11 years in the role.
Kogan.com climbed 8.7 per cent to $4.86 after the e-retailer said its gross profit increased 19.5 per cent to $37.4 million in the third quarter, and its Kogan FIRST subscriber program had risen to 440,000 paying members, up from 385,000 a year ago.
The Aussie was buying 63.77 US cents, from 63.55 US cents at Tuesday's ASX close.
ON THE ASX:
* The S&P/ASX200 index finished Wednesday down 2.6 points, or 0.04 per cent, at 6,854.3.
* The All Ordinaries gained 0.7 points, or 0.01 per cent, to 7,046.3
The NZX 50 Lost -45.74 points (-0.42%) to 10838.3
Overseas Market Report
[Morningstar with Dow Jones]: A steep drop in shares of Alphabet, Amazon.com and other technology companies dragged the Nasdaq Composite into correction territory Wednesday.
Asia
Chinese shares closed mostly higher with investor sentiment boosted by China's additional CNY1 trillion central government bond issuance. However, a steady improvement in economic data and a more visible recovery of the property sector is likely needed to sustain the positive impact of the policy stimulus measures, CreditSights analysts say in a research note. The benchmark Shanghai Composite Index closed 0.4% higher at 2974.11, the Shenzhen Composite Index was up 0.9% while the tech-heavy ChiNext Price Index declined 0.9%. Food and liquor, and auto stocks led the gains. Kweichow Moutai rose 2.1% and Wuliangye Yibin added 3.7%. BYD advanced 0.8% and Great Wall Motor gained 1.1%. Telecommunications stocks fell, with China Unicom losing 3.6% after its 3Q results.
Hong Kong shares ended higher, snapping a four-session losing streak as consumer and tech sectors gained. PC maker Lenovo was the top gainer, up 7.3%, while NetEase added 3.3%. E-commerce giants Alibaba and JD.com added to the gains. Among consumer stocks, China Mengniu Dairy and Trip.com rose 3.5% and 2.9% respectively. In focus were measures Hong Kong announced to boost its property market. Property stocks had a mixed reaction to the news, which included tax cuts for homebuyers. Country Garden slipped 0.3% and Longfor Group rose 0.4%. Real-estate firm CBRE said in a comment that the measures could be effective long term, but that housing prices will stay under pressure in the short run, with high interest rates still a major barrier for buying decisions. The benchmark Hang Seng Index rose 0.55% to 17085.33 and the Hang Seng Tech Index added 2.2%.
Japanese stocks ended higher, led by gains in automakers and trading houses as concerns about the Middle East conflict recede for now. Toyota Motor gained 1.6% and Mitsubishi Corp. climbed 2.3%. Kokusai Electric jumped 28% on its market debut following an $830 million initial public offering. The Nikkei Stock Average rose 0.7% to 31269.92. Investors are focusing on earnings and the latest developments in the war between Hamas and Israel. The 10-year Japanese government bond yield rises 1 bps to 0.850%. USD/JPY is at 149.83, compared with 149.91 as of Tuesday 5 p.m. Eastern Time.
India's Sensex fell 0.8% to close at 64049.06, reversing earlier gains. Markets struggled for clear direction, with Asia equities ending mixed. Focus was on fresh stimulus from China, continued concerns about the Chinese property sector after the reported default of a major developer, and simmering tensions in the Middle East. Losses on India's benchmark index were led by financial stocks such as IndusInd Bank, which fell 1.8%, and ICICI Bank, which dropped 1.5%. Other decliners included Infosys, which lost 2.8%, and Bharti Airtel, which was down 1.9%.
Europe
European stocks mostly rose as banks and financial stocks gained following sector results. The DAX edged 0.1% higher and the CAC 40 advanced 0.3%, though the pan-European Stoxx Europe 600 traded broadly flat. Deutsche Bank rallied 8% and Lloyds Banking Group and Banco Santander climbed 2% after 3Q results. "While Lloyds initially struggled for gains, German lender Deutsche Bank has seen its shares rise on the back of a management pledge to look at increasing payouts after 3Q revenues came in ahead of forecasts," CMC Markets analyst Michael Hewson wrote. Oil stocks trade slightly higher as Brent crude rose 0.6% to $87.72 a barrel.
The FTSE 100 closed up 0.3% on Wednesday helped by China's plans to increase infrastructure spending to boost its economy, which lifted metals prices and mining stocks such as Rio Tinto and Glencore, CMC Markets analyst Michael Hewson said in a note. Lloyds was the day's biggest riser, followed by Rio Tinto and Bunzl, up 2.2%, 1.9% and 1.8% respectively. Ocado was the session's biggest faller, down 9.4%, with Reckitt Benckiser down 4% and JD Sports Fashion down 2.1%.
North America
A steep drop in shares of Alphabet, Amazon.com and other technology companies dragged the Nasdaq Composite into correction territory Wednesday.
The tech-heavy index slid 2.4% in a punishing session that pulled it down more than 10% from its recent high. Its losses accelerated in the afternoon, sending the gauge to one of its worst one-day declines of the year.
The S&P 500 fell 1.4%, closing at its lowest level since May. The Dow Jones Industrial Average shed 105 points, or 0.3%.
Shares of Google-parent Alphabet tumbled almost 10% after reporting quarterly results that showed disappointing growth in its cloud business. The company shed more than $166 billion in market value, its biggest one-day loss ever. Shares of Amazon.com and Nvidia also fell, lagging behind the broader market, while fintech company Affirm and payments company Block dropped sharply.
The technology rout Wednesday punctures a rally that had dominated for much of the year. Many investors have piled into a handful of big tech stocks in a wager that they will benefit from innovations tied to artificial intelligence and keep flourishing. Now, some of that excitement is fading during a packed week for third-quarter earnings results and one of the worst bond routs in recent memory.
The yield on the 10-year Treasury note rose to 4.952% on Wednesday and breached 5% on Monday for the first time in 16 years. Yields rise as bond prices fall.
To some analysts and investors, the recent volatility is a harbinger of more turmoil ahead and a wake-up call that the stock market's stars???megacap tech stocks???are susceptible to sharp swings after their results. Meta Platforms and IBM report this week, and investors are bracing for more dramatic moves.
"These are the crown jewels" of the stock market, said Raheel Siddiqui, senior investment strategist at Neuberger Berman. "But they are not immune."
Texas Instruments also reported lackluster third-quarter earnings results, weighing on other semiconductor stocks. Shares of Texas Instruments shed 3.5%. Nvidia lost more than 4.3%, and AMD and Intel each dropped around 5%.
Though tech stocks were among the hardest hit, the losses were broad. Nine of 11 of the S&P 500's sectors notched declines, including the healthcare and real-estate groups. The Russell 2000 index of small companies, which has been flashing a recession signal, dropped 1.7% and sank deeper into the red for the year.
Of course, it hasn't been all bad; cloud results at Microsoft gave its shares a boost. The stock added 3.1%.
Investors remained focused on the government-bond market, which has been prone to wild daily swings. Some businesses are feeling the heat from the sharp rise in mortgage rates, which have ascended alongside Treasury yields.
Shares of TransUnion, one of the three major credit-reporting firms, fell 7.1% Wednesday after a 23% swoon in the prior session. The company, which provides credit scoring and related tools for lenders' underwriting decisions, cut its expectations for this year and pulled its 2025 financial targets, after lower mortgage activity dented its business. Executives also flagged a broader slowdown in banks' consumer lending.
Home Depot shares have slid for seven consecutive sessions, the longest losing streak since 2016, before a rush to buy homes and fix them up during the pandemic sent shares to records.
Some investors said the market was due for a turbulent stretch after the S&P 500 and Nasdaq climbed for much of the year.
"This volatility that we're seeing in the market is nothing unusual," said Larry Adam, chief investment officer at Raymond James.
Still, Adam said he expects bond yields to moderate and for the economy to slow in coming months.
Many investors remain hungry for risk. Bitcoin prices have soared to some of their highest levels in more than a year lately, in part because of hopes that an exchange-traded fund tied to the cryptocurrency will be approved by regulators.
