Large scale rating agency Moody’s has cut its rating on the entire US banking system, moving to negative while pointing out the “deteriorating operating environment” as the reason for the downgrade.
Outside of the wider banking sector interest, US Consumer Price Inflation (CPI) data was released for the month of February, coming in at expected levels of 0.4 per cent during the month, taking annualised inflation to 6.0 per cent.
Leading tech news was Meta Platforms (Facebook’s parent company) who will lay off another 10,000 workers following an initial cut of 11,000 workers in November last year.
CEO Mark Zuckerberg said the company will look to cut projects that aren’t performing up to standard while also removing layers of middle management in hope of aiding a speedier decision making process.
Responding to this new cost saving initiative, investors pushed the stock higher by 6.8 per cent at the time of writing to be the 4th highest performer.
Interestingly, First Republic Bank, which was cited as having a potentially similar risk situation to SVB late last week, has rebounded to find a 35 per cent gain this morning.
Air and Transport related stocks struggled as United Airlines, J B Hunt Transport Services and Alaska Air have all lost roughly 3.5 per cent to be the market laggards.
Rest of the World
SVB-related concerns still weighed heavily on listed financials as far away as Asia. Worth mentioning was Japan’s SoftBank (-3.5 per cent, its lowest point since October) while South Korea’s index, the KOSPI lost 2.0 per cent by the close.
Unfortunately, the associated selling activity has led to most major Asian indices completely wiping away gains made earlier in the year, with the MSCI Asia pacific index hitting a low of 155.4 during Tuesday’s trading, down from a 171 point early February high.
News from Europe included Volkswagen’s full year earnings release for 2022, which featured a 13 per cent increase in operating profits to €22.5b (NZ$38.75b), a 13 per cent increase from the previous year.
Other highlights included a 26 per cent increase in electric vehicle deliveries, despite a 7 per cent decrease in overall deliveries which the company linked to increasing working capital amidst wider supply chain and logistical issues.
Further, the German carmaker pledged another €180b of investment between 2023 and 2027 with roughly two thirds focusing on “electrification and digitisation” .
New Zealand
New Zealand equities traded lower during Tuesday’s trading, down -0.7 per cent to 11.595.5 points.
Auckland Council pulled its tender where it had originally been seeking advice for a potential sale of its ~18 per cent stake in Auckland airport, worth roughly $2b.
A statement from the council cited costs associated with consultation and decided to delay any proceedings until the council had worked through its current budgeting process.
Acting treasurer Francis Caetano said: “The council decided to pause the appointment of an adviser on the sale of Auckland International Airport shares while we work through the budget process” which follows on from comments by Auckland Mayor Wayne Brown.
Brown floated the idea as a means to meet the council’s projected budget shortfall over the next few years.
Shares in AIA traded modestly lower on the update, down 0.1 per cent to $8.57.
Other news in the market included the continuation of takeover proceedings for NZX listed tech company Pushpay, with the company’s current outstanding takeover offer from Pegasus Bidco receiving another deadline extension to 7pm Wednesday evening.
Bidco’s currently offer stands at $1.34 per share, with Pushpay closing at $1.26 (+1.6 per cent) it seems investors are still pricing significant risk that the deal may not go ahead.
Australia
Australian equities were down sharply, despite many economic commentators and investors shifting stance – now expecting the RBA to hold interest rates constant (at least in the short term) following the SVB collapse late last week.
Just a few days ago, interbank futures had priced interest rates to 4.1 per cent this year, this has now decreased a full 50 bps to 3.6 per cent.
Against the falling market, top performers included materials-linked stocks like Ramelius Resources, Perseus Mining, Silver Lake Mining, each finding 5.8, 4.4 and 3.7 per cent gains, respectively.
All three are involved in the extraction or processing of gold as investor inflows move from risky assets into into safe haven metals during times of macroeconomic or systemic shocks.
In what has been a light year for equity capital transactions, Tuesday included the unveiling of an ambitious plan from Michael O’Keeffe to create the largest ASX listed diamond company.
Details included O’Keeffe’s ASX listed Burgundy Diamond Mines signing on to a US$136m deal to acquire Ekati Diamond mine in Canada, looking to raise an additional US$150m in equity.
A key geopolitical update included an official announcement from the Australian government, which will spend up to $368 billion of the next three decades to procure, construct and operate a fleet of eight nuclear powered submarines with the idea of combatting Chinese military advances in the pacific.
Australia will partner with the US and Britain after meeting in San Diego on Monday (UST) where President Joe Biden said “we’re putting ourselves in the strongest possible position to navigate the challenges of today and tomorrow together. Together. I’m proud to be your shipmates.”
Wider market implications will potentially be felt as China is a significant trading partner of Australia.
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