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Informed Investor weekly market outlook

Monday 8th November 2021

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Attention this week will turn to pandemic beneficiary in Mainfreight which releases half year numbers on Thursday. The company has kept on moving through the lockdowns, and highlighted in an update at the start of September that trading has been robust despite the lockdowns. This could well come through in the numbers, with the reopening path (including in Australia) bolstering the outlook.

Before then Pushpay is reporting interim results on Wednesday. The US focussed donation software provider has benefited hugely during the pandemic as ‘giving has accelerated’ so it will be interesting to see how these trends are playing out as the US reopens. US listed peer Blackbaud provided a positive read across with its results last week, and that digital engagement remaining high even as people head back to church en masse. Trustpower (today), Goodman Property Trust, and Infratil are also due out with half-year numbers this week.

Data wise this week the October food inflation numbers will be of interest (+5% forecast yoy) not least of which given recent debate over the third supermarket operator. Aside from Foodstuffs and Countdown, few would argue against the desirability of any regulatory intervention which brings down the cost of the weekly grocery shop.

Business confidence numbers will be in focus, and on to what degree the extended lockdowns in Auckland, Waikato and Northland have had an impact. To date investment and hiring intentions have been resilient. As has been the confidence of consumers, with rising house prices also playing a part no doubt – the monthly property report due from Real Estate Institute will provide some insight into how the market is coping with extended lockdowns and also recent lending rate rises.

Vaccination updates will be in the spotlight as usual, and as the 90% double vaxxed milestone targets come into sight. Hopefully Auckland and other locked down areas will be fully open before too long. This would be positive for great news for ‘reopeners’ such as Sky City.

The resilience of the NZ (and Australian) economies has been highlighted in the results coming out of the banking sector. We will likely see further confirmation of this when NAB reports on Wednesday. Westpac shares performed poorly with respect to peers last week, with the bank’s cost base and margin pressure a clear area of concern following the full year results. NAB at least has already gone through a significant digitation process, with a significantly lower cost base in relative terms.

Looking ahead a key number later in the week will be the US inflation print. Inflationary pressures are likely to have intensified, with the markets expecting a year on year rise of 5.7%. Any number much hotter than this may not be that well received, and may crystallise the need for the Fed to provide a timeline on tightening, and versus the narrative that inflation is ‘transitory.’ The US earnings season rolls on this week, with Paypal and Disney amongst the key blue-chip names reporting. The earnings season overall has been very strong overall and kept the wind in the sails of the US indices which hit fresh record highs on Friday following a strong set of jobs numbers.

Have a great week!

Source: Greg Smith is the Head of Retail at Devon Funds Management

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