6 DEC 21 – Monday Market Highlights – Transcript

Kate Power
Good morning. It’s Monday, the sixth of December and I’m Kate from Milford. The new COVID-19 variant Omicron was a key focus last week, which led to volatility in equity markets throughout the week, as market participants tried to understand the impacts of the new variant. Volatility was fueled by mixed messages from Madonna and Pfizer announcements, with Maderna, stating that vaccine efficacy would be lower due to the number of Spike proteins, while Pfizer stated that three shots should provide sufficient protection against the new variants. Ultimately, they’re still insufficient data to conclude the virulence of the new variant. The Australian GDP print was better than expected as fiscal stimulus reduce the impacts of lockdowns on households. Australian GDP declined 1.9% quarter on quarter compared to an expected contraction of 2.7%. From a year on year basis, GDP growth slowed from 9.6% to 3.9%, which was above consensus at 3%. household savings ratio increased from 11.8% to 19.8%, which reflects the impacts of the government’s fiscal stimulus measures. This supports the suggestion of a consumption led rise in economic activity as households draw down savings. Moving to the US, the Fed Chair stated it may be appropriate to complete its tapering of asset purchases a few months earlier. In early November, the Fed announced that it plans to complete its asset purchase program in mid 2020. Policy makers next meet in mid December, where they could decide to accelerate the tapering. Powell also stated that the Fed will no longer characterize high inflation as transitory and that inflation is higher and more persistent than expected. These announcements highlight the Fed has moved from a dovish policy to a hawkish policy. Turning to equity news, Collins food reported a strong half year results driven by the performance of KFC Europe. KFC Europe beat expectations as revenue increased 32% underpinned by strong same store sales growth of 14.6%. The EBITDA margins returned to peak levels reporting a 14.7% margin, an increase of 6.2% year on year. Overall, the group grew revenue by 8.5% and EBIT da by 13%. Woolworths his bid $1.75 cash per share to acquire 100% of API, which is one of three major pharmaceutical wholesalers in Australia. This represents a 12.9% premium to the price agreed between API and Wesfarmers. Under the scheme implementation date announced in early November or worse bid also represents a 53% premium to API’s previous close price. The API board has confirmed it will allow Woolworths to undertake due diligence to facilitate a binding offer. However, the West farmers scheme implementation deed includes a right to match in favor of West farmers, which is exercisable before API enters into any binding agreement with a competing proposal. Rumors spread last week that CSL is in discussions to buy viva, which is one of the largest Swiss pharmaceutical companies. On Friday morning, CSL addressed the market by stating that CSL regularly assesses strategic opportunities that can improve its business, improve the health of people around the world and provide value to shareholders, but did not deny nor confirm the rumors. Finally, the sound conference was held on Friday, which was a one day conference where international and local fund managers present their exclusive investment ideas and insights in a fast paced format. Three of the stocks were discussed at the conference being Megaport Pinnacle and flat center. Looking to the week ahead, the RBA meeting will be held on Tuesday, where the market is expecting interest rates to be held at point 1%. We can expect q3 Euroregion GDP growth rate data which is expected to be 2.2% growth quarter on quarter and 3.7% year on year. Later in the week, China will release their November inflation print, and the US will release that continuing and initial jobless claims for November. Thanks for listening, and we’ll see you next week.