What’s driving markets, reflecting on Saxo’s equity theme baskets
Consumer spending sectors are leading the charge – with Construction, China Consumer and Technology up the most on the week, with Logistics doing well too - as the flow of goods increases with China’s economy reopening.
Year-on-year - the Defence equity basket is up the most: 21%. While the sector that typically suffers from rising interest rates, e-commence, is down the most YoY.
In terms of global share markets, Hong Kong’s market is outperforming as China stretches out of lockdown.
Hong Kong’s Hang Seng (HSI.I) rose 2.8% last week – it’s now up 38% from its low. The US S&P500 (S&P 500.I) which is tech-heavy, rose 1.9% last week – that’s its first week of gains after three weeks. Europe’s Stoxx600 followed – rising 1.4% last week, taking its gain to 20% from its October low. While Australia’s market (ASXSP200.I) fell on the week, slipping 0.3% - marking its fourth week of losses. But it’s worth remembering, March is the second worst month for the ASX - as it's when dividend rights are transferred to shareholders.
What’s on the economic horizon this week
On Tuesday, the RBA meets - with a 25bps hike expected. The key is to watch commentary - and if the RBA continues with its more hawkish (aggressive) tone. Because it is this aggressive rhetoric of making further hikes, that has pressured the Australian equity market. The market now expects interest rates will peak at 4.2% in September, with potentially no rate cuts this year. So, if the RBA’s tone is aggressive - it could see the Aussie dollar (AUDUSD) knee-jerk higher.
In the US, Fed Governor Jerome Powell is testifying for two days, Tuesday and Wednesday. The JOLTs Job report is out on Wednesday. While the all-important US jobs, non-farm payrolls data is out on Friday. We have to consider – the US has had weeks of very hot inflation, and employment data - all above expectations, which pushed up bond yields, and market expectations for interest rates to peak at 5.5% in September.
We’re waiting to see if data continued to remain hot in February. However, if the data is in line with forecasts – with jobs growth slowing in Feb - it could be a huge relief for markets – as it might suggest some cooling of rates is ahead. This could send the US dollar and bond yields lower. And if that happens, equity markets could rally.
Then next week - US inflation and PPI data are out, with monthly and yearly numbers expected to fall. All these data sets will give a gauge of what we can expect in the future for rates, ahead of the Fed meeting on March 22.
Some large companies are going ex-dividend this week. What are the implications?
Woodside goes ex-dividend on the 8th of March, followed by BHP and Rio going ex-dividend on the 9th of March. When a company goes ex-dividend - its shares usually pull back. We saw that with Fortescue Metals last week.
Some investors use these pullbacks to buy into a stock they like, while others may like to buy a stock they like ahead of the ex-date - so they’re entitled to the dividend.
What company news should you potentially be across, which could move respective industries
CrowdStrike (CRWD), the cybersecurity giant reports on Tuesday. We see the cybersecurity industry growing at very high rates over the next several decades. For CrowdStrike, we’re looking for an improvement in its profitability, following its peer - Palo Alto Networks reporting stronger results than expected results recently. That said, the market is expecting a quarter of smaller net new annualized recurring revenue. However, improvement near the end of the quarter in the macro climate adds to the thinking that CrowdStrike could report a positive earnings surprise.
Campbell Soup (CPB) reports results on Wednesday and expected to report double-digit organic and sales growth in the quarter, as a result of price rises. It’s also worth noting year-on-year, Campbell Soup shares have outperformed the S&P500 and risen 19%, versus the S&P500's 8% decline.
JD.com (JD), the Amazon equivalent in China, report results on Thursday. It could give further insight into Chinese consumers’ appetite post lockdown. And what they’re seeing in consumer spending ahead. It's also worth watching Saxo’s China Consumer and Technology basket of stocks.
Oracle (ORCL) the former tech giant, reports on Friday. It will be interesting to watch and see how the business is transitioning to subscription services.
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