21 FEB 2022 – Monday Market Highlights – Transcript

Roland Houghton
Good morning. It’s Monday the 21st of February and I’m rolling from Milford. The key economic focus is most certainly on the geopolitical tensions in Eastern Europe As the world continues to speculate on Putin’s plans with Ukraine. Now there are many lays this issue and there are a number of potential human and economic consequences should this escalate. The most obvious economic impact will be felt in energy markets and you’re seeing increasing volatility in commodities such as oil. Now, crude oil futures were flat last week, however, there are over 21% Over the past three months. Turning to the US, the Federal Open Market Committee minutes were released last week. And the general interpretation was that they were more dovish than anticipated, given they didn’t specifically state when they plan to introduce quantitative tightening nor whether they would do a 50 bit rate hike straight off the bat. It is important to remember, however, that these were the minutes from a meeting they had at the end of January prior to the significant inflation print we saw earlier this month. US retail sales data was released for the month of January and beat expectations increasing 3.8% month on month first 2% expected internet retailers saw the strongest monthly growth increasing 14 and a half percent followed by department stores up 9% and furniture retailers up 7% USPPI. Data was also released last week, increasing 1% month to month in January. Remember the PPI measures the average movement and selling prices from domestic production. Core PPI which focused on the change in prices of finished goods excluding food and energy also increased point 8% month on month. Now, ppi and CPI are highly correlated. So it’s generally a good indicator of inflationary pressures in an economy. Turning to the mystic news, it was quite light as it relates to official economic data, with the key release being the Ozzie employment numbers for January. Employment grew 13,000 month on month with the unemployment rate holding firm at 4.2%. Both of which were roughly in line with market estimates. In New Zealand. House prices fell for the second month in a row in January declining 1.5% month on month across the country. Auckland house prices fell 2.6% which was a slight acceleration and Queenstown reverse quite sharply going from positive 4.8% in December to negative 3.9% in January. Also a New Zealand Omicron has well and truly taken hold, with the country recording over 1000 cases a day quite consistently. Turning to equity news reporting season in Australia and New Zealand continues to ramp up and looking at the ASX 200. Specifically 37% of companies have reported their results month to date. Now 48% of these have beaten expectations with 27% disappointing the balance of which was obviously just in line. In terms of price performance financials X property, energy and materials are rallying the most on the day of their results, with it being the worst performing sector. Now this is despite the biggest positive earnings revisions occurring for it’s stocks. So Australian technology companies are most certainly caught up in the global technology direct Telstra, CSL bhp and Goodman group all reported last week with all four actually beating consensus expectations. There was some confusion around the Telstra result and how it compared to consensus. But what was clear was the very strong performance from their mobile segment with EBIT da grew 25% year on year. Now there are too many companies to touch on. But what has been clear is that cost pressures are really impacting most sectors, particularly for those businesses who have most of their workforce in Australia. Crown also finally agreed to enter an implementation deal with Blackstone with the board unanimously recommending that $13.10 per share takeover price. Now this is by no means a done deal, as they still require a number of approvals. Finally, Cathy Woods closely followed Ark innovation ETF continues to struggle falling 5% On Friday, taking February losses to 14% and year to date losses to 31 and a half percent. This fund has generally been considered a bit of a proxy for high flying technology stocks with little valuation support, and is now 58% of its 12 month highs. Looking to the week ahead, we will continue to monitor the situation Eastern Europe given its potential implications for both equity markets in general global political stability, and important meaning to look for this week is that between Antony Blinken, the US Secretary of State and Sergei level of the Russian Foreign Minister, as the US continues to try find a diplomatic solution to the tensions. In terms of specific economic data. It’s quite a busy week and the US the personal consumption index will be released on Saturday morning, with the market expecting a point 5% month on month increase in the Core Data Series taking the annual change to 5.1%. Now the PCE is one of the two key measures of consumer inflation in the US with the CPI being the other. There are a number of differences between the two however, they generally move together and it is actually the preferred measure of inflation by the Federal Bank and Australia. We have the release of the quarterly wage price CINDEX on Wednesday, with economists expecting a 2.4% annual increase in wages, a slight acceleration on the 2.2%. experienced in the September quarter, and New Zealand. The RBNZ said press conference will be held on Wednesday, where New Zealand central bank will announce their decision on the official interest rate, which currently sits at 0.75%. The market is expecting them to hike interest rates once again this week. And in fact, economists expect the RBNZ to raise rates at every meeting this year with the OCR expecting to reach 2.5% by year end. Finally, we will continue to work through what will be a wave of results this week, and it will be very interesting to see how companies navigate the current tricky operating environment. Thanks for listening. We’ll see you next week.