Global indices fell on expectations of policy hikes in the US. Disappointing fourth quarter results from US stocks dented sentiment further. Energy strengthened on the back of higher crude prices.
Wall Street fails to digest rate-hike concerns and disappointing results
Wall Street fell on Tuesday as rate-hike angst and rising interest rates compounded with a disappointing continuation to the reporting season. The US 2-year Treasury bond jumped +7bp to 1.03% ahead of next week’s Federal Reserve meeting; US 10-year Treasury bond gained +5bp to 1.85%. Ten of the 11 sectors traded lower with technology and communication services leading losses; energy bucked the trend, gaining +1.1% with higher oil prices. The Dow lost -1.6% and S&P 500 dropped -1.7%. Goldman Sachs dived -8.1% after it missed fourth quarter profit expectations due to weak trading activity and higher-than-expected compensation expenses; Morgan Stanley (-5.0%) and Bank of America (-2.8%) slipped ahead of their results today. The tech heavy Nasdaq fell -1.8% ahead of a US Senate panel set to discuss the market control of companies including Alphabet (-2.4%) and Apple (-1.4%). Microsoft (-1.4%) announced a US$68.7b cash acquisition of Activision Blizzard (+27.1%). A broker cut its rating on Airbnb (-2.8%).
Europe stumbles on expectations of policy hikes
The Stoxx 600 lost -0.9%; technology stocks declined -2.5% on expectations of policy hikes. Energy inched up +0.1%, lifted by the highest crude prices in seven years. A broker reported Bain Capital was considering a bid for a stake in French food caterer Sodexo’s (+1.5%) benefits and rewards services unit. Supply chain bottlenecks contributed to a slowdown in chocolate maker Lindt & Spruengli’s (-3.7%) North American business. The FTSE 100 slid -0.5%, weighed by consumer companies and banks. British payroll data showed an additional 184,000 staff added to payrolls in December. Unliever extended losses -4.0% as the company indicated it would continue to pursue a deal for GlaxoSmithKline’s (-0.6%) consumer business. THG (-9.0%) warned its core earnings margin would fall short due to adverse currency movements. Just Group (+8.7%) reported a strong earnings result.
COVID-19 woes and US policy indicators drag Asia
Asian stocks traded mixed as COVID-19 woes and a surge in US Treasury bonds weakened sentiment. China’s Shanghai Composite rose +0.8% and CSI 300 gained +1.0% as the cut of two key policy interest rates signalled the potential for additional monetary easing action. Hong Kong’s Hang Seng slid -0.4%. The Bank of Japan maintained its monetary policy stimulus and lifted its inflation forecast; the Nikkei 225 slipped -0.3%. South Korea’s Kospi lost -0.9%. The ASX 200 inched down -0.1% on record COVID-19 deaths and weak economic data. Healthcare (-1.2%) and utilities (-0.6%) weighed. Rio Tinto dipped -0.4% after it reported its weakest annual iron ore production since 2015. JB Hi-Fi surged +6.9% as a lower-than-expected fall in profit eased fears that last year’s lockdowns took a big toll on trading; rival retailer Harvey Norman (+1.4%) also gained. Ampol’s (+2.4%) average margin at its Lytton refinery rose significantly in the final quarter of 2021. The NZX 50 (+0.1%) finished flat with Scales leaping +3.0% and Mainfreight lagging -1.3%.
WTI crude gains and gold flattens
WTI crude gained +1.4% to US$84.96/bbl, and gold (-0.2%) flattened at US$1,813.40/oz.
Business confidence fell sharply in the three months to the end of December, according to a survey of business opinion conducted by the New Zealand Institute of Economic Research. More than half of businesses raised prices in the December quarter and a net 65% planned to do so this quarter.
The row over New Zealand’s tighter responsible lending regulations is being compared with the situation in Australia that led to a high-profile court decision in Westpac’s (WBC.AX) favour. Lenders are up in arms over new rules requiring them to conduct detailed examinations of borrowers’ accounts over the past three months with little room for judgement.
Tourism Industry Aotearoa has appointed a former Tourism New Zealand manager as its new chief executive. Rebecca Ingram takes up her new role as Tourism Industry Aotearoa chief executive from March.
Westpac (WBC.AX) is warning investors not to fall for a sophisticated scam that involves a fake Westpac investment prospectus.
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