Jarden Brief: Oil price jumps another 10 per cent

Oil has jumped up 10.4 per cent to US$105.84 per barrel. Photo / Warren Buckland

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

New Zealand

The NZX 50 continued its incline yesterday, closing 1.8 per cent higher.

The top performer of the day was Church donor management system operator Pushpay Holdings, climbing 6.5 per cent. Meridian Energy rose 5.1 per cent and retirement village developer and operator Summerset Group Holdings increased 3.7 per cent.

Conversely, milk nutrition company Synlait Milk dropped 2.1 per cent yesterday. Tourism Holdings (-1.9 per cent) fell from its top performer position on Monday. Precinct Properties decreased 1.9 per cent.

In response to Monday's Cabinet announcement on border reopening, ANZ Bank economists forecasted the easing restrictions will potentially drive around 20,000 New Zealanders per annum moving to Australia, for the next few years.

This would further reduce supply of an already starved New Zealand labour market, as people, especially the younger generation, seek out lower living costs. But for now, the potential increase in positive sentiment around travel likely contributed to Air New Zealand's 3.7 per cent increase yesterday.

New Zealand signed a new free trade deal with the United Kingdom on Tuesday, aiming to have it in force by the end of the year. The deal was agreed to in principle last year, and it is claimed the deal will boost bilateral trade by 60 per cent through the elimination of most tariffs. Prime Minister Jacinda Ardern said she believed this will help accelerate New Zealand's recovery from the pandemic.

New Zealand Institute of Economic Research (NZIER) released its Quarterly Predictions for March 2022 yesterday. There are concerns about lack of labour supply due to Covid-19 infection and resulting self-isolation, leading to uncertainty over growth.

NZIER also mentioned expected inflation surges and anticipated continuation of increased interest rates.

Average house asking prices in New Zealand decreased in 11 of 19 regions last month, potentially signaling a market slowdown. Auckland's median house price decreased 1.3 per cent to $1,264,864 and Wellington declined less than 1 per cent to $1,006,600.

However, the average asking price nationally remains over 23 per cent higher compared to a year ago.

The Commerce Commission is currently carrying out a market study into the cost of building new homes. CoreLogic chief economist Kelvin Davidson commented that construction costs could climb 10 per cent this year. Tex Edwards of Monopoly Watch, who also founded 2degrees, said in a submission that competition is needed in the building sector to pull down prices. The current need for imported goods was another key theme among feedback to the Commission.

Banks across New Zealand have further responded to the events in Ukraine. ANZ announced its divestment from all Russian investments in its KiwiSaver scheme. Bank of New Zealand (BNZ) is likely to follow, stating its plan to dispose of Russian investments.

International
US

At the time of writing, the major US indices were in the red. The S&P 500 decreased 1.8 per cent, the Dow Jones Industrial Average fell 2.1 per cent and the NASDAQ fell 1.6 per cent.

Almost all sectors were in the red, with the energy sector alone showing positive movement, having increased 0.2 per cent. Financials were down 4 per cent. Technology, industrials and materials fell 1.8, 1.9 and 2.7 per cent, respectively.

Target rose 11.7 per cent, making the general merchandise company the best performer of the index at the time of writing. Today's release of its full year 2021 results showed sales growth of 9 per cent in the fourth fiscal quarter, despite persistent supply chain issues.

Software developer Epam Systems (+9.6 per cent) reversed its course from yesterday, when it fell 32.3 per cent The initial fall was likely due to Epam Systems announcing a withdrawal of its first quarter guidance and 2022 financial outlook. Today's movement may be seen as a small correction by investors.

Transportation and logistics provider, C.H. Robinson Worldwide, increased 7 per cent, on what appears to be no news.

Electric vehicle manufacturer Lucid Group was the biggest decliner at the time of writing, falling 16.2 per cent. This follows a decrease in their car production forecast for 2022 of up to 40 per cent and is a result of supply chain and logistic challenges.

For the second day in a row, healthcare company Viatris falls into the bottom three movers, dropping another 10.2 per cent. This is a 31.7 per cent decline in the past two days for Viatris. The company reported a loss of US$263.8 million in its fourth quarter, bringing its total loss for the year to US$1.27 billion.

Royal Caribbean Cruises was rounding out the bottom movers, dropping 8.7 per cent amidst the uncertainty in Ukraine.

President Joe Biden is scheduled to give his State of the Union address later today.

Rest of the World

Asian markets were in the green. The Shanghai Composite increased 0.8 per cent, the Nikkei rose 1.2 per cent, and the Hang Seng climbed 0.2 per cent.

Conversely, European markets fell overnight, likely due to investors desiring assets in Asian markets that could be seen as 'safer'. The FTSE decreased 1.7 per cent, the DAX lost 3.5 per cent and the CAC fell 3.9 per cent.

Russian equity and derivative markets remain closed. In other equity markets, ETFs (exchange traded fund) centred around Russian stocks continued to fall. iShares MSCI Russia ETF fell 21.3 per cent, having lost 69.3 per cent in the last month. VanEck Russia ETF decreased 13.0 per cent, down 61.3 per cent from the previous month.

Commodities

Gold and silver have continued their upward trend with an increase of 1.8 and 3.6 per cent respectively.

Oil jumped up 10.4 per cent to US$105.84 per barrel. This is the first time in over seven years that the price of oil has increased over US$100 per barrel.

The entire cryptocurrency market was up 4.5 per cent, an addition of US$90 billion to the total market cap of the cryptocurrency market. Bitcoin and Ethereum increased 5.9 and 3.5 per cent, respectively.

The U.S 10-year treasury rate declined to 1.707 per cent, bringing a total decrease of 28 basis points over the past two days. The demand for assets that could be seen as 'safer' continues to increase, which looks to be driving the U.S treasury rates down.

Australia

The ASX remained in the green, finishing 0.7 per cent higher than the previous day at 7,096.50 points.

The Reserve Bank of Australia (RBA) held the cash rate at 0.1 per cent, citing the Russia-Ukraine crisis as a "major new source of uncertainty". RBA Governor Philip Lowe noted that inflation increases exceeded the bank's expectations but remain below many of Australia's peers. The RBA will maintain the cash rate until actual inflation sits sustainably within their 2.0 to 3.0 per cent target. While Australia's inflation rate is currently 3.5 per cent, there is uncertainty around whether this rate is sustainable.

The information technology sector performed the best yesterday, rising 5.7 per cent, now up 8.6 per cent across the past five days. Other sectors that experienced an increase were telecommunications services (+1.5 per cent) and consumer discretionary (+1.4 per cent).

Utilities and materials were the largest underperformers, falling by 2.2 and 0.3 per cent, respectively. Utilities was also the worst performing sector over the past week, dropping 3.7 per cent.

Among single stocks, bookmaker PointsBet Holdings finished best on ground, climbing 17.5 per cent to close at A$4.17.

Uranium miner Paladin Energy climbed 13.0 per cent. Paladin continued to follow global uranium companies upwards as the ongoing conflict in Ukraine created uncertainty for Europe's energy supply. International reports suggest Germany's economy and climate minister is considering extending the lifespan of the country's nuclear power plants.

Biotechnology company Imugene rounded off the single stock outperformers with a gain of 12.8 per cent to close at A$0.27.

Gold and base metal company Sandfire Resources was yesterday's biggest underperformer, falling 11.6 per cent, after missing their half year estimates. This was their worst one-day performance since March 2020.

Closing out the bottom movers were mining and mineral company Perseus Mining, trading 7.4 per cent lower, and buy now pay later company Zip decreasing 6.3 per cent.

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Disclaimer: The Jarden Brief is provided for general information purposes only. It reflects views and research available 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. The Jarden 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 financial advice disclosure statement is available free of charge at https://www.jarden.co.nz/our-services/wealth-management/financial-advice-provider-disclosure-statement/ Full disclaimer available at: https://www.jarden.co.nz/wealth-sales-and-research-disclaimer