US markets (S&P 500 Index -0.8%) fell for a second session following the US Federal Reserves’ rate hike. A fear persists that the Fed’s actions will push the US economy into recession. Stocks dependent on a strong economy took the hardest hit on Thursday, with consumer discretionary (-2.2%) and Financials (-1.7%) the worst-performing sectors.
Another factor working against US stocks on Thursday was the Bank of Japan’s intervention in the currency markets. As part of the intervention, the BoJ sold US treasuries to help support a battered yen, causing yields on the 10-year treasury to spike to 3.7% from 3.5%.
On a positive note, Health (+0.5%) ended the day in the green. Eli Lily (+4.0%) grabbed headlines with rumors that its weight loss drug could become a blockbuster for the company. Other drug stocks caught up in the broad sector rise included Merck (+3.5%), Bristol-Myers Squibb (+2.6%), and AbbVie (+1.9%).
The USD dollar index (+0.6%) climbed on the day with weakness found in emerging market pairs, including USD/INR (+1.4%).
European markets (Stoxx 600 Index, -1.8%) closed lower Thursday with investors reacting to rate hikes from the US Fed (+75bps), Swiss Central Bank (+50bps), and the Bank of England (+50bps). Regardless of Swiss and UK rate hikes, the euro (+0.04%) and pound (0.0%) remained flat on the day.
Pacific Edge (PEB: NZX)
Pacific Edge (-4.0%) fell on its NZX announcement that its commercial contract with Southern health (Te Whatu Ora Southern) was still yet to be signed. The sell-off may be an overreaction since the contract will likely soon enter an approvals process after sign-off from the Southern health management team.
We still like the fundamentals of the company and large addressable market and hope to see more promising updates in the coming months. We are BUY rated at current levels given adequate funding to support its growth initiatives but believe this stock is more suited to long-term investors that are patient for long measured growth.
Australian & New Zealand Market Movers
The Australian market (ASX 200 Index, 0.0%) was closed on Thursday for a National Day of Mourning for the late Queen Elizabeth the Second. The Aussie dollar (-0.6%) gained on the day.
The Market remains unsure whether the RBA will raise interest rates by 50 or 25-basis-points next month.
The New Zealand market (NZX 50 Index, +0.2%) rose marginally on Thursday. Trade volume was affected by the public holiday in Australia.
On the currency front, the NZ dollar (-0.1%) hit its lowest level since March 2020, which could benefit exporters like Fisher & Paykel Healthcare (+1.5%) which was up on the day.
Air New Zealand (+1.4%) rose again for the second day on its updated positive half-year earnings guidance. Further, the airline held its annual meeting yesterday, where it dismissed concerns about the weak NZ dollar affecting its profitability.
What Markets will be Watching this Week (UTC –4)
Monday
Japan Inflation Rate YoY (AUG)
Australia RBA Meeting Minutes
Tuesday
Canada Inflation Rate YoY (AUG)
Wednesday
US Fed Interest Rate Decision
BoJ Interest Rate Decision
Thursday
BoE Interest Rate Decision
Friday
US Fed Chair Powell Speech