Kiwi Kiwi Kiwi

US debt default warning, Oil surges 6% to $100, NZ lift rates 0.5%. Who's next?

Equities 6 minutes to read
APAC Strategy Team

Summary:  Crowdstrike shares surge putting cybersecurity in the limelight. Apple and BHP poised to announce share buy backs, which will support further share price growth. Oil rocks back over US$100 lifting oil stocks in New York and Australia. A Twitter shareholder sues Elon Musk for allegedly committing fraud. Iron ore and aluminium are back in vouge, boosting Rio Tinto shares. US defaults to double according to S&P Global. New Zealand makes its biggest increase in interest rates in 22-years.


Co-written by Market Strategists Jessica Amir in Australia, Redmond Wong in Hong Kong.

What’s happening in equites that you need to know?

US stocks fell for the third day. The S&P 500 (US500.I) and the Nasdaq 100 (USNAS100.I) lost 0.3%. As always, there were bright sparks at the stock level. The world’s biggest cybersecurity company, Crowdstrike (CRWD) rose 3.2% to US$223.51 (its highest level since November last year), after Goldman Sachs upgraded the stock to a buy. We’ve previously mentioned Crowdstrike as a stock to watch. It makes 94% of its money from subscriptions, and we like businesses like these, given they are set to benefit from elevated demand to address cyberattack fears. The market also likes Crowdstrike with 93% of analysts rating the stock as a BUY. Goldman Sachs expects Crowdstrike’s shares to rise to $285 in a year. Also in MegaCaps, Apple (AAPL) shares jumped over 1% after whispers that Apple could announce a buyback of US$80-$90 billion (and buy backs support share price growth). 

Hang Seng Index (HSI.I) and CSI300 (000300.I)
are little changed. Hang Seng Tech (HSTECH.I) was up 0.6%.  Energy and mining stocks outperformed.  Zijin Mining (02899) surged 7%.  Jiangxi Copper (00358), China Molybdenum (03993), MMG (0128) rose more than 5%.  CNOOC (00883) rallied 4% and China Coal was up from the 6%.  In A shares, logistics names outperformed while real estates, airlines, online entertainment led declines. 

Twitter (TWTR) shareholders sue Elon Musk (TSLA CEO). A Twitter, shareholder sued Elon Musk for allegedly committing fraud by delaying the disclosure of his ownership of more than 5% of Twitter, so Musk could buy more shares at a cheaper price. The investor said Musk should  have disclosed his holding by March 24, instead of April 1. Twitter shares rose 27%, from $39.31 on April 1, to $49.97 on April 4. Twitter shareholder, Marc Bain Rasella is also looking to represent a class of investors who sold Twitter shares from March 24 to April 1.

Crude oil (OILUKJUN22 & OILUSMAY22) jumps 6% to $101, as OPEC said the obvious, that’s it’s impossible to replace supply losses from Russia, while China also hints of restrictions easing. This supports gains in oil stocks in the US overnight and in Australia today. 

The Australia share market more (ASX200) rose 0.2% by 1pm local time with energy and mining stocks fueling the market higher. Also of noteRio Tinto (RIO) rose 2.2% after the aluminium and iron ore price extended their rebound. Both prices are important to Rio as it makes 58% of its revenue from iron ore and 22% from aluminium . Also consider demand for aluminium  is expected to grow with company’s like Apple and Nestle's Nespresso to use more of the material to reduce CO2 emissions.

Iron ore (SCOA) rebounded yesterday rising 2.5%, but today it’s about 0.9% lower, but holds 8-month highs, at US$154.25. It comes as China again pledged to stabilise its economy and this brightened the outlook for steelmaking ingredient. BHP (BHP) shares are holding at $51.71, and remain in their long term uptrend. So it's worth keeping an eye on BHP. BHP is also touted to annouce a record profit this year and a share buy back, which also supports share price growth. 

What you need to consider

US defaults to double according to S&P Global. S&P Global Rating anticipates the US’s default rate will swell from the current 1.5%, to 3% by year-end, amid financial conditions tightening. In China, the S&P Global Ratings expects more property developer defaults, with $18 billion in maturing debt and the likelihood of home sales falling 15-20%.

Inflation is uncomfortably high. March CPI hit 8.5% year-on-year. The hottest inflation since 1981. Core CPI moderated a bit, mostly due to a cooling of oil prices, and rose 6.5%. This is still the highest rate since 1982. The largest prices rises were in; fuel oil (70%), gas (48%), used cars (35%), hotels (29%), airfares (24%) and utility gas (22%) on a year on year basis. See the full list here (scrolling to pdf page 9). Simply this tells us, the US Federal Reserve is behind in fighting inflation, so expect a 0.5% interest rate hike at the May FOMC meeting, with rates to hit 2.6% at the end the year.

In RMB terms, March China exports rose 12.9% while imports fell 1.7%.  In USD terms, March exports climbed 14.7% from a year ago and imports declined 0.1%. Trade surplus increased to USD47.4 billion (vs consensus $21.7bln, Feb $30.6bln).

New Zealand makes its biggest increase in interest rates in 22-years,  while also announcing quarantine free travel. The RBNZ increased interest rates by 0.5% to 1.5%. The surprise caused the New Zealand stock market to fall 0.4% with their tech stocks falling 1.4%. However, as NZ announced quarantine-free travel, the travel industry got a kick, Auckland International Airport (AIA) shares rose 1.1% higher.



Trading ideas to consider

Aussie dollar and Kiwi ‘up and at em’, amid travel boost. The Australian dollar (AUDUSD) is back in vogue, rising for the second day, after Australian business confidence rose to its highest level in 5 months. While the NZ dollar (NZDUSD) also rallied for the second day, heading toward 0.69 US. It’s worth watching these two currencies as travel takes off as well between the two nations.

Travel stocks. Air stocks like Air New Zealand (AIZ) and Auckland International Airport (AIA), and Qantas (QAN), Singapore Airlines (SIAL), China Eastern Airlines (CEA) could be worth watching as they have not recovered from the covid falls in 2020. If China restrictions ease and tourism reopens, it’s worth keeping these on your radar.

For a global look at markets – tune into our Podcast 


Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank (Schweiz) AG
Beethovenstrasse 33
CH-8002
Zurich
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.