Investor sentiment was strong on Thursday. Rumours of a restructuring of Chinese property developer Evergrande lifted contagion concerns. US stocks jumped despite mixed economic data and political risks in the weeks ahead.
Bond investors price in future tapering, equity investors celebrate Evergrande not blowing up yesterday
US equities recovered from the losses earlier in the week. Cyclicals were the biggest winners of the day despite initial jobless claims and continuing unemployment claims rising, the manufacturing and services PMIs decreasing, and Congress still needing to fund the government, address the debt ceiling, and settle differences on infrastructure. US 10-year Treasury yields added +6bp to 1.39% as investors started pricing in some tapering. The VIX market fear gauge calmed to under 19 after peaking at 29 on Monday. The Dow Jones gained +1.8%, the S&P 500 rose +1.6% and the Nasdaq climbed +1.3%. The small cap Russell 2000 increased +2.0%. The energy sector (+3.4%) gained the most as oil prices increased, while increasing bond yields saw financials rise +2.9% and real estate fall -0.3%. PC maker Dell (+3.7%) reaffirmed guidance and signalled it will return capital to shareholders. Salesforce (+6.9%) and Accenture (+2.9%) raised earnings guidance. Darden Restaurants jumped +6.0% after releasing a strong earnings result. General Motors (+2.2%) announced a US$300m investment in autonomous driving startup Momenta.
Bank of England comments kept FTSE 100 flat
Europe’s Stoxx 600 climbed +0.9%. Faurecia bounced +6.7% after the French car parts company released a strong earnings result. The UK's FTSE 100 (-0.1%) was little changed after the Bank of England hinted that interest rate hikes might be seen sooner than expected, forecasting end-of-year inflation to reach more than twice the Bank’s target rate. Rolls Royce increased +3.5% after a broker raised its target price on the aerospace company. Financial services group Investec rose +3.4% after releasing positive guidance for its upcoming half-year result.
Rumours of Evergrande restructuring boosted Hong Kong property developers
Hong Kong’s Hang Seng gained +1.2%, China’s CSI 300 added +0.7% and the Shanghai Composite rose +0.4%. There was no news on whether property developer Evergrande (+17.6%) managed to pay foreign bondholders the coupon they were owed on Thursday, but there were reports the company may be restructured with help from government entities. South Korea’s Kospi shed -0.4%. Japanese markets were closed to observe the Autumn Equinox. The ASX 200 added +1.0%. All sectors were in the green, with energy (+2.8%) gaining the most as oil prices rose. Oil Search (+3.4%), Santos (+2.9%) and Woodside Petroleum (+1.7%) all increased. A broker reiterated its BUY rating on miner Fortescue Metals (+1.0%), while another lowered its rating on BHP (-0.7%). Fashion retailer Premier Investments jumped +3.4% after reporting strong earnings. The NZX 50 rose +0.7%, with gains in Skellerup (+3.8%), Ryman Healthcare (+3.2%) and a2 Milk (+2.8%) pushing the index higher. A court ordered Sanford (-1.3%) to pay NZ$500k after a crew member on a fishing vessel died in November 2018 due to the company exposing workers to risk of death or serious injury.
WTI crude iron ore gain, gold drops
WTI crude climbed +1.44% to US$73.27/bbl and iron ore added +1.45% to US$120.73/MT. Gold slipped -1.5% to US$1,752.00/oz.
The Financial Markets Authority is mulling enforcement action after a review of credit card repayment insurance found both the product to be “poor value” as well as complacency among providers.
Fonterra (FCG/FSF) is aiming to return at least NZ$1b to shareholders and fund unitholders in the next two to three years, with potentially more to come after 2025, as its revised strategy bears fruit.
Mercury (MCY) expects its acquisition of Trustpower’s (TPW) retail arm to have paid for itself within six years.
- Plexure (PX1) SSM