Jarden Brief: Putin warns oil price could hit $100

Energy shortages are placing pressure on the price of oil. Photo / Getty Images

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

New Zealand:

A 0.2 per cent recovery of the NZX 50 yesterday made up for Tuesday's 0.2 per cent decline.

Consumer non-cyclicals and energy were the top performing sectors, rising 5.0 and 0.3 per cent, respectively.

A2 Milk surged 12.4 per cent. This price increase came on the back of investor optimism around the reduced disruption to Chinese sales, which have been greatly affected by Covid-19. Infant formula company, Bubs Australia, outlined in its first quarter report that sales of infant formula in the daigou reseller channel rose 6.5 times on the previous year, up 265 per cent for the quarter. Daigou involves individuals or groups purchasing products outside China and then sending them back to the country - a key sales channel for a2 Milk. A2 Milk investors appear to have responded favourably to the indication that the daigou sales channel is recovering.

A2 Milk's largest customer, Synlait Milk, rose 5.0 per cent. Kathmandu gained 2.6 per cent, recovering from the start of the week's decline.

Financials fell 0.6 per cent and the utilities sector declined 0.5 per cent.

Mercury NZ fell 2.2 per cent, easing off from the 3.1 gain on Tuesday. Argosy Property lost 1.9 per cent and telecommunications company Chorus declined by 1.7 per cent.
Vital Healthcare Property Trust went into a trading halt yesterday after a $140 million capital raise announcement. New shares were sold at $2.90 per unit, a 3.7 per cent discount to Tuesday's $3.01 close. The capital raised will be used to acquire Tennyson Centre, an Adelaide cancer treatment facility, for A$92.75 million.

Stats NZ released September's Food Price Index (FPI) data. Food prices rose 0.5 per cent in September, an increase of 0.9 per cent after seasonal adjustment. Meat, poultry and fish prices increased 1.8 per cent, non-alcoholic beverages gained 1.2 per cent, grocery food prices rose 0.8 per cent and restaurant meals and ready-to-eat food rose 0.2 per cent. On the flipside, fruit and vegetable prices declined 1.5 per cent.

The preliminary October ANZ Business Outlook saw business confidence come back two points to minus nine, while own activity expectations rose six points to 26. The increase in the forward-looking own activity expectations is a mark of economic resilience.

International Markets:
US:

US equities were trading stronger at the time of writing, with the S&P 500 and Nasdaq trading higher by 0.3 and 0.7 per cent. The Dow Jones Industrial Average remained unchanged.

Markets moved with Consumer Price Index (CPI) data for the month of September, as prices increased slightly higher than expectations (0.4 per cent) for the month, and the same for the year-on-year measurement.

Outperforming sectors include utilities and materials which have made gains of 0.9 and 0.6 per cent, respectively.

Sector gains were buoyed by impressive performances from both computer hardware manufacturer Xilinx and global investment giant BlackRock. Xilinx traded up 3.9 per cent after the company finally received approval for a patent on new technology, which was filed in 2019. BlackRock reported Q3 earnings, which featured a beat of third-quarter profit estimates, enabled by robust performance fees and strong demand for its actively managed and sustainable funds.

In contrast, downward pressure on indices was drawn from sector losses in financials (down 0.8 per cent) and energy (down 0.2 per cent).

Medical equipment company Align Technology was the largest underperformer at the time of writing, down 6.8 per cent, trading with flows of information ahead of its third quarter results on the 28th. Joining Align was Delta Air Lines, which was also impacted by its own earnings release. Despite earnings per share coming in at 30 cents, above consensus estimates of 17, investors were still concerned about any clear track to full recovery post the Covid-19 pandemic.

Rest of the World Markets:

Asian indices were mixed overnight. The Shanghai Composite and Shenzhen both moved forward by 0.4 and 1.3 per cent as Chinese markets reacted to trade data which came in above expectations.

The Nikkei traded lower, making a loss of 0.3 per cent, while the Hang Seng was closed due to a level 8 typhoon warning forcing residents to stay home in the wider Hong Kong area.

Commodities:

In commodities this morning, Gold is trading stronger by 2.1 per cent at US$1,795.8 per ounce. WTI crude oil slipped 0.2 per cent, now priced US$80 per barrel. News included Russian President Vladimir Putin warning oil could go as high as US$100 a barrel amidst a prolonged energy shortage. He also stated Russia would continue to meet its contracted obligations in supplying gas and other fossil fuels to Europe, labelling contrary opinion as "politically motivated blather". Yields are also trading lower, with the 10-year now priced at 1.54 per cent.

Australian Markets:

The ASX 200 declined a further 0.1 per cent during Wednesday's trading.

Despite the overall decline of the index, nine out of 11 sectors were trading slightly higher, led by A-REIT (+1.6 per cent) and consumer staples (+0.7 per cent). Materials and financial stocks were dragging the market lower, declining by 1.1 and 0.6 per cent, respectively.

The ASX listed shares of a2 Milk rose 13.4 per cent, making them the biggest gainer of the day on the ASX 200.

Industrial and water equipment manufacturer GUD Holdings closed 8.7 per cent higher. The company gave an update at the Citi Australia & New Zealand Investment Conference yesterday. The market reacted positively as the update showed that the company was performing well and in line with management expectations. Demand also remained resilient despite disruptions caused by the pandemic.

Star Entertainment Group (+6.5 per cent) was the next best performer, recovering a small proportion of the losses made at the start of the week. The casino operator provided a further response to media reports, which accused Star of being involved in money laundering at its Sydney and Gold Coast casinos, stating that the "assertions are incorrect".

Mining companies Fortescue Metals Group (-5.3 per cent) and Mineral Resources (-4.6 per cent) reversed their upward trend from the start of the week.

The Bank of Queensland also underperformed, decreasing 4.3 per cent. This comes despite it reporting strong financial year 2021 statutory profit and cash earnings, which increased by 221 per cent (to A$369 million) and 83 per cent, respectively. However, the bank is expecting a squeeze on margins in the current financial year due to competition and low interest rates.

• 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>