Devon Funds Morning Note - 13 March 2026

Friday 13th March 2026

War Costs

Global

US equities are trading weaker as oil surged above US$100 per barrel on comments from President Trump saying that preventing Iran from acquiring nuclear weapons was a higher priority than oil prices, while the release of strategic oil reserves has done little to cool the rally, worries over private credit and new US tariff investigations have further darkened sentiment. The S&P 500 is down 1.5%, the Nasdaq slipped 1.8%, while the Dow Jones is off 1.6%.

Hopes for a swift reopening of the Strait of Hormuz are diminishing, with Iran’s new leader pledging to keep the chokepoint shut and seven ships reportedly hit in the past 24 hours. US officials still aim to have naval escorts operating by late March, however, the International Energy Agency has cut its oil supply growth forecasts and cautioned that the Middle East conflict is causing an unparalleled shock to global energy markets.

The US dollar climbed to its strongest level in nearly two months as investors sought safety amid mounting uncertainty over how expensive the war could become, both economically and fiscally. US officials have told lawmakers that the first six days of the conflict have cost more than US$11.3 billion, and that figure could double as we enter day 14. The prospect of higher defence spending and broader geopolitical spillovers has pushed markets to assume larger US budget deficits ahead, which in turn weighed on longer dated Treasuries as investors demanded more yield to hold them.

Concentrated selling in financials has stretched across the market after fresh stress signals emerged from the private-credit sector. Banks slid as investors reassessed both credit risk and transparency around their exposures, following news that Deutsche Bank had identified about US$30 billion of private credit related positions, which the market interpreted as a sign that banks may be more entwined with this opaque, less regulated lending channel than previously appreciated.

Compounding this, Blue Owl (-4.3%) felt compelled to reassure investors that a recent US$1.4 billion loan sale involved no “hidden” discount, while Morgan Stanley (-4.0%) is limiting redemptions form its North Haven Private Income Fund after investors have requested repurchases of 10.9% of shares outstanding in 1Q26 already – exceeding the 5% quarterly buyback limit.

The main concern is that, if private credit loans continue to be marked down and funding tightens, banks could face losses on direct exposures, commitments, and facilities to private credit funds, as well as knock on effects via borrowers that rely on both bank and non bank lenders. That narrative fed a “de risking” move across the sector: higher perceived tail risk, wider credit spread expectations, and worries that regulators may push for more capital or tighter oversight, all of which weigh on bank valuations.

New Zealand

The Kiwi market reversed the previous day’s rally, falling 0.7% as Brent crude jumped back up in price. Among the heaviest drags included Sky TV (-4.1%), Meridian (-3.8%), and Freightways (-2.6%). The few bright spots were Winton Land (+3.0%), Turners (+2.0%), and Channel Infrastructure (+1.8%).

Port of Tauranga held its investor day, covering key topics that confirmed long-term growth will be capex-heavy, with export volumes broadly flat (aside from kiwifruit) and growth driven by imports and trans-shipments. Management reiterated its return on invested capital goal is now expected to be reached by FY27, leaving FY26 earnings per share unchanged.

Air New Zealand has announced it will cut flights in response to persistently high jet fuel costs. The airline plans to consolidate around 1,100 flights, impacting roughly 44,000 customers, by combining lightly booked services, trimming frequency on selected routes, and potentially shifting some passengers onto alternative flights.

Datagrid NZ has obtained approval to proceed with a large-scale data centre in Southland, designed with up to 280MW of power capacity. This would place the facility among the country’s biggest single electricity users, potentially second only to New Zealand’s largest industrial load. The centre is aimed at cloud, AI and high-performance infrastructure, and will materially increase local demand for renewable generation.

In the same space, PwC has highlighted in their study that the natural gas used in New Zealand’s energy system cannot maintain today’s levels of use due to local production now on a clear downward trend. as a result, the gas market will need to shrink materially over the next decade, with large industrial users, electricity generators and some commercial customers expected to shoulder much of the adjustment as contracts roll off and alternatives (renewables, electrification, LPG or imported fuels) are phased in.

Australia

The ASX 200 erased a further $40 billion off the market yesterday, as the index fell 1.3%. Losses were broad based, with most major sectors in the red. Tech faced much of the brunt, falling 3.4%, while investors bought back into Energy (+2.1%) off the back of the spike in oil prices.

Benefitting from the increase in oil, Karoon Energy (+4.8%), Beach Energy (+3.6%), and Woodside (+2.1%) all saw solid gains, while coal names, Yancoal (+10.5%), Whitehaven (+6.7%), and New Hope Corp (+4.2%) rallied despite news the IEA would release 400 million barrels into the market.

Retailers Temple & Webster (-7.7%), Lovisa (-7.0%) and Nick Scali (-4.6%) were also hit hard, on CBA’s latest card-spending data pointing to a softer consumer backdrop, feeding directly into selling pressure. Household spending fell by 0.5% in February, the first monthly drop since September 2024. Annual spending growth slowed, while discretionary spending also eased to 5.7% from 6.6%.

In individual company news, Europe and Australia’s fast food operator Collins Foods (+5.2%) surged on an inline trading update that it has agreed to acquire eight KFC restaurants in Germany, while Pay.com.au is lining up a priority offer for the payments and reward platform existing shareholders at a price that implies an $850m pre-money equity valuation, alongside a primary IPO raising of $85m.

Lastly, software company Atlassian announced it will cut 1,600 roles as it reorients the business around AI and higher-priority growth initiatives. Atlassian expects to incur between US$225m and US$236m in one off charges tied mainly to severance and related employee costs, plus the early termination or downsizing of some office leases.

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