Jarden Brief: Inflated stocks start to weigh on US market

Major tech companies wobbled on the markets. Photo / Getty Images

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

New Zealand:

Yesterday's session saw the NZX 50 rise 0.3 per cent. Consumer non-cyclicals was the best performing sector up 3.2 per cent. The utilities sector was up 2.1 per cent. Healthcare was the worst performing sector, down 1.2 per cent.

Aquaculture company Sanford led yesterday's session, up 6.8 per cent. In a media statement last week, they apologised and outlined their acceptance of the judge's decision on a case involving the company's illegal fishing activity in a Benthic protection area of seabed in New Zealand. Sanford and two crew members were fined, with the vessel forfeited. They put the mistake down to human error and have reinforced their company commitment to sustainability. The judge noted Sanford otherwise has "an excellent record in this area".

A2 Milk recovered from Monday's session, up 5.5 per cent. Meridian Energy rose 4.3 per cent.

Auckland International Airport was the worst performer yesterday down 2.9 per cent. Air New Zealand also fell 1.3 per cent.

The GDT auction saw large movements in dairy commodity prices overnight. The GDT milk price index was up by an 15.0 per cent – the biggest movement in the index since August 2015. Whole milk powder prices led the gains, up 21 per cent. Meanwhile, skim milk was up 3.5 per cent and anhydrous milk up 13.7 per cent. Growth in price seemed to be demand-driven, with Chinese buyers gobbling up around two thirds of the supply. The recent unfettering demand out of our largest trading partner, as well as the South East Asian region has now seen Asian countries make up 90 per cent of the market.

Navigation service provider Airways New Zealand released its interim results for the half year ending 31 December 2020. Domestic travel reached 80 per cent of pre-pandemic levels at the end of the period, a better improvement than expected. A $13.8 million half year loss was reported with limited international travel impacting their core revenue stream.

The December 2020 quarter (Q4) New Zealand Terms of Trade were released yesterday. These look at New Zealand's international trade and measure the prices of exports relative to imports. Both export and import prices decreased with import prices down by 1.7 per cent in Q4 and export prices down 0.4 per cent. This saw a 1.3 per cent increase in the terms of trade. Export volumes rose 3.3 per cent and import volumes increased 6.5 per cent compared to the previous quarter. This volume rise occurred during a challenging time for freight internationally. It was driven on the import side by crude oil import volumes more than doubling in the December 2020 quarter.

Medical device company TruScreen Group appointed Dr. Dexter Cheung to their board as a non-executive director. Dr Chung is the Research and Development Manager for the respiratory humidification division of Fisher & Paykel Healthcare.

International Markets:
US:

The S&P500 and the Nasdaq were unable to continue yesterday's momentum during the current session, trading down 0.5 per cent and 1.0 per cent respectively. The Dow Jones Industrial Average was flat at the time of writing.

Top sectors for this morning's trading include materials and consumer staples moving a modest 0.5 and 0.1 per cent. On the flip side, information technology and real estate were both down a percentage point. Amongst the equities, the biggest mover was Fox Corp (up 8.5 per cent at the time of writing).

Many say this drawback is likely due to some investors considering the impact of inflated equity valuations in technology stocks, as many of the tech giants (Apple Inc, Tesla etc) made losses in today's trading after yesterday's record rally. Looking forward, American households will be upbeat this morning as a $1400 stimulus check is likely to pass through the senate and become available late this month. Given the increasing involvement of retail investors in the stock market, much of this stimulus may find its way into listed assets.

The stock with the greatest excess return was media company Fox Corp, which spiked 9.3 per cent. Information, data and market measurement company Nielsen Holdings PLC and automaker company Ford Motor Co rounded out the complement on the best performers podium, up 7.2 and 5.4 per cent respectively.

Green energy company Enphase Energy was the worst performer on the day, down 6.1 per cent.

Asia:

The Shenzhen Composite was down 0.7 per cent and the Hang Seng also down 1.2 per cent.

A top Chinese Banking regulator has raised concerns about overseas asset bubbles and a potential knock-on effect into Asian markets should they suddenly deflate. Deleveraging has been the watchword – a concept that has been a priority for President Xi given the quantity of debt held by the nation. Comments from the regulator's chairman have led some to read in an appetite for tighter monetary policy.

Commodities:

Amongst commonly tracked commodities. Gold was flat at US$1,729.9 per ounce. Crypto currencies took a dive after yesterday's jump, with Bitcoin down 2.3 per cent to US$47,650 while Ethereum was down 2.7 per cent to US$1,505.49. WTI Crude oil was flat at US$60.94 per barrel. US 10-year treasury yields remain stable at 1.41 per cent.

Australian Markets:

The S&P ASX 200 closed Tuesday's session slightly lower at 6,762.3 points, down 0.4 per cent.

Consumer staples and Financials were the only two sectors that made a gain, with an increase of 0.8 per cent and 0.4 per cent, respectively.

Yesterday's Reserve Bank of Australia board meeting revealed that it brought its quantitative easing program forward to counter last week's sell-off. It will keep its bond buying target at A$200 billion and hold the official cash rate at 0.1 per cent.

The best performer of the day was a2 Milk, up 7.6 per cent, which brings the current share price to A$9.54. Brokers are divided about their stock ratings since the current price is only half of what it was six months ago. However, with the borders still closed and Chinese daigou sellers not able to enter Australia, it is questionable how well the company will perform.

The second biggest gainer was Sims, a global leader in metal and electronics recycling, up 5.2 per cent, followed by Eagers Automotive, up 4.5 per cent.

Gold Road Resources, down 8.1 per cent to A$1.09, and Westgold, down 6 per cent to A$1.87, were among the worst performers yesterday due to a rally in the US dollar and global equities.

The buy now, pay later company Zip Co was also among the worst performers, down 5.8 per cent to A$10.33, after its Swedish competitor Klarna raised A$1.29 billion to fuel its growth in the US.

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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-disclaimer