Jarden Brief: Inflation plays havoc with Aussie tech stocks

A number of tech companies were hit hard in Australia this week. Photo / Getty Images

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

New Zealand

The NZX 50 rose a slim four basis points yesterday.

Energy and consumer cyclicals were the top performing sectors, rising 2.5 and 0.3 per cent, respectively. In contrast, the worst performing sectors were financials and healthcare which slipped by 0.6 and 0.5 per cent, respectively.

Z Energy topped the market after its Investor Day yesterday, rising by 3.2 per cent. "The Game Plan" to be delivered by the end of financial year 2024 is threefold and includes optimising the core business, transitioning to a low carbon future and disciplined capital management. Investors responded favourably to the investor day, pushing the stock price upwards.

Casino operator, SkyCity Entertainment Group, also rose 3.2 per cent. This followed the announcement that SkyCity Adelaide could reopen yesterday, albeit in a "staged manner", following the lifting of the South Australia seven-day lockdown.

NZX Limited rose by 1.6 per cent yesterday, continuing the recovery from its mid-July decline.

On the other hand, cinema software company, Vista Group International, was the worst performer of the NZX 50 yesterday, down 4.2 per cent. Yesterday's performance saw Vista lose the 3.0 per cent gains it made on Tuesday.

Similarly, donations management company, Pushpay Holdings, fell by 2.2 per cent yesterday, conceding almost all of its 2.3 per cent rise on Tuesday.

Aged care provider, Oceania Healthcare fell 2.0 per cent with the resignation of Group General Manager Property and Development, Mark Stockton.

INTERNATIONAL
United States

The major US indices were a mixed bag this morning. The S&P 500 was trading flat at 4,400.8 points, the DJIA slightly declined by 0.3 per cent, and the NASDAQ was up 0.6 per cent.

Energy and communication services were the best performing sectors, increasing 1.0 and 0.9 per cent, respectively. On the other hand, utilities and consumer staples were underperforming, declining 1.1 and 1.0 per cent, respectively.

Advanced Micro Devices was the top gainer of the session, increasing by 7.4 per cent, while Xilinx also rose by 6.5 per cent. Both are semiconductor producers, an industry which is benefitting from the supply shortage as demand is high, pushing prices up.
Lastly, pharmaceutical and biotech company Moderna, was trading 4.9 per cent higher, recovering losses from the previous session with growing fears of the delta strain likely having an impact.

The biggest loser of the day was health and wellbeing company, Humana, dropping 5.8 per cent after its earnings announcement before market open.

Next in line was manufacturing company, Idex, down 2.9 per cent, as it reported weaker than expected quarter two earnings.

Rounding out the bottom performers was coffee franchise, Starbucks, declining 2.8 per cent despite beating earnings estimates and raising its fiscal 2021 earnings-per-share forecast.

Apple (-1.1 per cent) reported its third-quarter earnings yesterday and topped analyst's expectations across the board of product sales for its various offerings. All of the company's product lines grew over 12.0 per cent year-on-year. iPhone sales increased by almost 50.0 per cent year-on-year. The overall revenue of the quarter was US$81.41 billion. However, investors did not like that Apple warned about slowing performance for the September quarter due to the chip shortage, which might impact iPhone and iPad production.

Early this morning, the Fed announced it would continue to keep interest rates near zero, saying that the economy keeps strengthening, despite new Covid-19 worries where the government introduced new mask mandates. Investors are still trying to find indicators as to when the Fed will reduce its bond buying programme.

Tomorrow, the second-quarter GDP numbers will be released, with estimates sitting around 8.4 per cent annualised growth.

Rest of the world

The Nikkei traded down 1.4 per cent after a strong rally earlier in the week, while the Hang Seng improved, trading 1.5 per cent higher after a sharp decline. The Shenzhen edged slightly lower, decreasing 0.1 per cent, and the Shanghai index continued declining, down 0.6 per cent.

European markets were performing well as major companies like Deutsche Bank and Barclays were reporting earnings, both beating analysts' estimates.
Additionally, England announced that soon, fully vaccinated travellers from the US and EU will no longer need to quarantine upon arrival.

Commodities

Gold declined by 0.4 per cent to US$1,793.60 per ounce.

Oil was trading higher, increasing 1.1 per cent to US$72.42 per barrel.
All cryptocurrencies were in the black, with Bitcoin increasing 4.2 per cent and Ethereum rising 2.2 per cent.

The US 10-year treasury rate was yielding 1.261 per cent, at the time of writing.
Australia

The ASX 200 traded lower yesterday, dropping 52.1 points or 0.7 per cent to 7,379.3. The equity market was spooked by an annualised inflation print of 3.8 per cent.

Real estate was the only sector to finish the day in the green, up 0.8 per cent. Healthcare was the next best performing sector, only falling 0.2 per cent.

Services infrastructure owner, Spark Infrastructure Group, was the best performing stock on the day, up 5.4 per cent. KKR and the Ontario Teacher's Pension Plan have entered a revised A$2.95 per share bid to acquire the company. The bid values Spark at 1.57-times its regulated asset base and comes as part of a wave of interest in infrastructure merger and acquisition deals.

The next best performer on the day was packaging solutions company, Orora, up 3.1 per cent. The gain appears to have been driven by an analyst increasing their target price.

Academic and educational services continued to lead the declining sectors, down 2.5 per cent for the day after the Chinese government considered education, which will require all tutoring companies to be run as not for profits. Australian education providers receive a significant portion of their revenue streams from the country.

The energy sector was the next worst performer, down 1.2 per cent.

Nickel producer, Nickel Mines, was the worst performer on the day, down 11.1 per cent. The company released its quarterly results, which revealed a marginal 0.7 per cent rise in nickel production quarter on quarter. This improved performance was more than offset by a 5.0 per cent rise in cash costs, driven by rising thermal and coking coal prices. Coal is an input into the smelting process.

Inflation played havoc with tech stocks, bringing with it the spectre of rising interest rates as the Reserve Bank of Australia adjusts its monetary policy. Such moves imply larger discount rates, which disproportionately affect technology stocks, given the majority of their profits tend to be forecast to occur farther into the future.

Financial technology company, Netwealth, was the worst of the affected technology stocks, down 6.7 per cent. It was joined by online marketplace operator, Redbubble, also down 6.7 per cent; online gambling company, Pointsbet Holdings, down 4.5 per cent; data labelling and machine learning company, Appen, down 4.4 per cent; and buy-now-pay-later superstar, Afterpay, down 3.6 per cent.

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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>