US equity markets rallied on Tuesday, with the S&P500 gaining 1.6% to close at 4,462.21.
The technology focused Nasdaq100 gained 2.2%, ending the trading session at 14,210.30. The rally was broad based across all sectors, except for energy, which declined. Earnings season is underway in the US, with IBM announcing that they expect to hit the top end of their revenue growth forecast in 2022, despite suspending their business in Russia.
The bigger news was Netflix (NFLX) which released their results after the market closed. In a shock announcement, the company detailed that they have lost 200,000 customers during the first quarter and anticipate losing a further 2 million customers during the second quarter. This is the seventh time over the past eight quarters that the company’s subscriber numbers have come in under analysts’ expectations. The company’s share price has plunged over -25% lower during after market trading, to be currently around US$348 a share. After peaking in November at just over US$700 a share, the share price has dropped over 50% over the past five months.
In economic news, the International Monetary Fund (IMF) slashed their forecast for global GDP on Tuesday, down to 3.6% in 2022 from an earlier forecast of 4.4% in January. They cited the recent Russian invasion of Ukraine renewed Covid lockdowns in China as the major reasons for their more pessimistic outlook. The IMF also made mention of the risk of sustained higher inflation and encouraged Central Banks to lift interest rates to bring higher prices under control. The yield on the US 10-year note continues to rally, gaining 9 basis points to finish at 2.94%, showing that even if Central Banks are dragging their feet to lift official cash rates, the bond market continues to price in a higher rate environment.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
The Australian share market good off to a positive start following the Easter long weekend, gaining 0.6%, closing at 7,565.21, the highest level since early January. Prices are now only a whisker below the all-time high of 7,628.92 set in August 2021. ASX SPI200 futures are up a further 48 points (+0.6%) in overnight trading, suggesting additional gains on market open today.
Commodity prices were largely weaker overnight, with crude oil prices retreating -4.5% to close at US$103.40 a barrel, while spot gold fell -1.2% to close at US$1955.50 an oz. Iron ore prices softened, with prices dipping -2.6% to finish at US$149.85 a tonne.
To currency markets, and the Australian dollar (AUD/USD) firmed slightly against the USD, to be currently trading at 73.77 US cents, while the biggest news in currencies is the continued weakness in the Japanese yen, with the US Dollar now buying close to 129 yen, up from around 115 only five weeks ago. This is being driven by the divergence in monetary policy between the two countries, with the Bank of Japan intent on implementing yield curve control and maintaining the yield on the 10-year bond at under 25 basis points. The Bank of Japan (BOJ) is effectively sacrificing their currency to maintain bond yields within the desired range.
In Aussie stock news, Ramsay Health Care have received a non-binding offer of $88 a share from the US private equity company KKR. This represents a more than 36% premium to the latest closing price of $64.39 a share. The AFR reports that Ramsay’s largest shareholder, Paul Ramsay is supportive of the offer, with UBS active as an advisor.
This article was written by James Woods, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3632.
