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Market turns on tech sector, Block, Xero surge, gold miners weaken

Daily Market Update

The local market finished the week on a high note, gaining 1.9 per cent on the back of an incredible surge in the technology sector.

The mid-session turnaround in the Nasdaq pushed the technology sector to a 6.9 per cent gain after the US-listed payment provider and owner of Afterpay, Block (ASX: SQ2) gained 15 per cent, with Xero (ASX: XRO) also recovering 9.4 per cent on improving confidence.

Every sector finished higher with the defensive consumer staples and utilities underperforming, up 0.8 and 1.1 per cent, whilst retailers and the property sector both up over 2 per cent.

Shares in packaging manufacturer Pro-Pac (ASX: PPG) fell 17.9 per cent after downgrading profit expectations to just $5 million.

The small-cap company flagged supply chain issues and surging raw materials costs ranging from resin to sea freight charges.

It was a similar story for Virtus Health (ASX: VRT) which downgraded forecasts and no longer expects to recover ground lost to surgery cancellations.

The result was a 1.6 per cent fall in revenue and a 30 per cent drop in earnings. Across the week the market still fell 1.8 per cent, with technology the biggest detractor, down 6.6 per cent, and healthcare outperforming amid the volatility.

PolyNovo (ASX: PNV) topped the market gaining 44 per cent, whilst Chalice and Novonix felt the brunt of the commodity weakness, down 24 and 21 per cent each.
 
Market rallies but delivers 7th week of declines, Twitter slumps on tweet, Robinhood surges
 
A broad-based rally across the market following comments that the Fed had no intention of increasing rates by 75 basis points supported all three benchmarks.

The Nasdaq gained 3.8 per cent, the S&P500 2.9 and the Dow Jones 1.5 per cent.

However, these weren’t enough to overcome a week worth of selling, with the Dow ending 2.1 per cent lower, the S&P500 2.4 per cent and the Nasdaq 2.8 per cent.

This marked the seventh straight weekly decline for the Dow, something that hasn’t happened for decades.

Among the drivers was a significant turn in the bond market, with the 10 year yield falling from 3.2 to 2.9 per cent and cooling in import prices in April, which were unchanged after a 2.9 per cent increase in the prior month.

On a company-specific level, Twitter (NYSE: TWTR) shares fell close to 10 per cent as Elon Musk appears to be postering for a better price, suggesting he was seeking to confirm how many fake accounts were on the platform before finalising the deal.

Shares in COVID-19 winner Robinhood Markets (NYSE: HOOD) gained 25 per cent after Sam Bankman-Fried, the owner of one of the world’s largest crypto platforms, FTX, announced he had bought 8 per cent of the shares on issue.
 
Supply chain relief, the lucky country, has the market bottomed?
 
Supply chain interruptions have been central to the challenges facing the global economy and ultimately contributing to inflation.

In a globalised world, all roads lead to China for the production of so many in-demand goods, yet few have been able to look beyond the short-term inflationary impact into one of the biggest contributors to the problem.

The end of lockdowns in China, which have ground global shipping to a halt, may well be exactly what the global economy needs to recover in the second half.

Whilst many are still predicting the Federal Reserve and RBA to go all the way with interest rates, a growing number of groups including our own CBA have suggested rate hikes will end far sooner than expected.

One such group was RBC Capital markets, who suggests the Fed may pause rate hikes in the second half of the year, rather than risk sending the US and global economy into recession.

The CEO of the CBA shared similar concerns, highlighting the drop in consumer sentiment and the large impact on variable rate mortgages.

Long known as the lucky country, 2022 is reminding us why. China’s demand for commodities saved us from the GFC and this time, the war in Ukraine has saved us from the global selloff.

Prices of everything from grain to coal and gas, have surged, supporting the ASX along with Federal Government tax takings; the lucky country indeed.




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