Morning report

Wall Street Bounces Back

Wall Street stocks on Thursday bounced back from a three-session losing streak following Wednesday's inflation scare, despite April US producer price inflation coming it at twice the rate economists expected. Commodity and mining stocks dragged UK and European indices slightly lower. Asian markets fell sharply, taking their lead from the US the previous night.

Wall Street rebounds because it was down

US investors keen to buy the dip shrugged off another sign of rising inflation and better than expected employment, helping Wall Street’s main indices rebound on Thursday. Headline US producer prices rose +0.6% m/m in April, above consensus of +0.3%, while the core PPI increased +0.7% vs expectations of +0.4%; over the last 6 months, when base effects were not an excuse, the PPI for final demand rose at an annualised pace of +7.4%. Data showed only 473k Americans filed for jobless claims last week, 36k fewer than expected. US 10-year Treasury bond yields fell nearly 4bps to 1.66%. The Dow Jones and S&P 500 rose +0.8% and +0.7% respectively, while the Nasdaq added +0.4%. Outside of small growth stocks (the ARK Innovation ETF was down -2.8%), the buying was fairly indiscriminate, with most sectors up more than +1.5%. Energy (-1.1%) was the clear exception as oil prices fell -3.9%; the Colonial Pipeline is being restarted after its operator reportedly paid hackers responsible for the shutdown a US$5m ransom. USlisted stock in Alibaba dropped -5.5% despite reporting a better than forecast +64% y/y quarterly revenue increase and predicting +30% growth this fiscal year. Dating app provider Bumble fell -14.8% to below its IPO price, also despite forecasting higher than expected quarterly revenues. Domino's Pizza Inc (-0.2%) rose as much as +4% at one point after activist investor Bill Ackman said his Pershing Square (+2.4%) hedge fund bought a 6% stake. Facebook (+1.0%) was among the FAANG stocks in the green after saying it will move its cryptocurrency operation from the friendly regulatory environment of Switzerland to the US.

Commodity stocks and miners drag Europe and UK lower

Europe's Stoxx 600 edged down -0.1%, with energy and basic materials leading declines in cyclical sectors while defensives rose. The CEO of pharma giant Roche (+1.6%) came out fighting against politicians' proposals to waive patents on COVID-19 vaccines (whose development was largely funded by governments). The UK's FTSE 100 slipped -0.6%. Miners like Rio Tinto (-4.1%) and BHP (-4.0%) and oil majors BP (-2.2%) and Shell (-1.7%) tracked commodity prices lower. Luxury brand Burberry fell -4.2% after issuing cautious guidance on costs. Telco BT Group (-5.9%) reported -7% and -6% declines in revenue and adjusted earnings.

Asian markets in the red

Asian markets mimicked the US, with the Nikkei 255 (-2.5%), Hang Seng (-1.5%) and CSI 300 (-1.0%) all falling. Hong Kong listed stock in Alibaba fell -3.2% after its result. The ASX 200 slid -0.9%. Two of the big four banks, Westpac (-2.3%) and National Australia Bank (-2.2%) traded ex dividend. Commonwealth Bank rose +0.4% after three brokers raised their target prices on the stock. The NZX50 fell -1.1%, its seventh consecutive session in the red. A2 Milk slumped a further -3.9% to over 3 year lows.

Crude and gold rose while iron ore slipped

WTI Crude fell -3.9% to US$63.51, gold rose +0.4% to US$1882.18 and iron ore increased +1.4% to US$218.38/MT.

NZ Headlines

San Francisco-based hedge fund Osmium Partners has increased its stake in listed media firm NZME (NZM), publisher of the New Zealand Herald, for a fourth time in the year to now own just over 18% of the company, based in part on what it believes to be enormous potential in the company’s One Roof real estate portal.

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This morning summary has been provided by Forsyth Barr Ltd and is for general information purposes only - your financial situation or goals have not been taken into account. If you would like more information or advice that is specific to you, talk to your financial adviser.