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Australia (ASX) & New Zealand (NZX) Market Movers – 24th May – Stock in Focus: Myer (ASX: MYR)

Australia and New Zealand Market Movers is provided by: Australasian Trading Management.

The Australian share market was lower on Wednesday (ASX 200 index -0.16%) falling for a fifth consecutive session. Weakness in the bank stocks continued with Commonwealth Bank and NAB feeling the biggest hit. Santos led the market losses after the company announced late on Tuesday it had rejected the $14.4 billion takeover proposal from United States giant Harbour Energy, adding it had terminated all discussion with the group.

The New Zealand market sold off yesterday (NZX 50 index -0.70%) with dairy companies A2 Milk and Fonterra shareholders fund leading the decline. A2 Milk continues to come under selling pressure, while Fonterra dropped sharply after it raised its forecast farmgate milk price for the 2018 and 2019 seasons while cutting its projected dividends for 2018 approximately in half, saying rising global dairy prices are squeezing margins. In other news, Argosy Property was the best performer, up as it lifted annual earnings 2.1 percent on flat rental income and said it will cut its retail exposure over the next 18 months, with real estate selling at “attractive prices” and the market near a cyclical peak.  Steel & Tube plunged to its level since May 2001 as it expects to post a loss before interest and tax of about $38 million this financial year.

Global markets were generally higher overnight as Wall Street rallied post the release of minutes from the latest US Federal Reserve meeting.

Minutes from the Federal Reserve’s May policy meeting showed the central bank was in no hurry to accelerate the pace of rate hikes even as the economy continues to improve. Most Fed policymakers thought it likely another interest rate increase would be warranted “soon”, and while there is much disagreement s amongst the Fed as far as the medium-term outlook, the notion of a near-term hike appears to be agreed upon by both dovish and hawkish members. Another interest rate hike in June is on the table, in our view.

As we have discussed many times this year, we believe the pace of interest rate moves higher (driven by the US) will be key to driving stock markets in 2018 (higher interest rates increase the cost of borrowing and have a negative impact on business and the economy, decreasing stock valuations). As such we are watching developments closely and the market is reacting to interest rate related news flow.

Stock in Focus: Myer (MYR:AX)

Myer shares appear to be finding a base after the struggling retailer’s share price almost halved since the start of the year.
In terms of recent news flow, Myer has announced John King will be their new and more experienced CEO and Managing director. King appears to have received some confidence in his ability to turn things around, with three company directors making sizeable purchases for Myer shares. Last week, Myer released their third quarter trading update which was not impressive, but the share price jumped as the market had expected worse. This was interesting as in recent memory updates have only been negatively received.There is also a risk of Myer getting close to breaching banking debt covenants. On this front, there is talk that that American global asset management firm Oaktree Capital may be looking to acquire the troubled department store, if it were to breach its debt covenant and enter into voluntary administration. Oaktree has a track record of buying distressed Aussie companies.

3 Things Markets Will be Watching this Week

1.  The development of trade talks between the US & China.

2.  US Federal Reserve Chairman Powell makes a speech on Friday, following the release of the latest Fed meeting minutes on Wednesday.

3.  This week also sees a number of profit updates from ASX/NZX company’s which we will be watching closely

Australia and New Zealand Market Movers is provided by Australasian Trading Management. ATM is an independent research house covering stock analysis across major markets including the ASX, NZX and US markets. We make our research easy to understand and concise, taking complex issues and simplifying them so that you can make informed and accurate decisions. We have no conflicts of interest and our only goal is to generate positive returns for our members. We run transparent model portfolios to track performance and invest where we see the most value, in companies of all sizes across all industries, and often in smaller companies.

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Categories: Australian Stocks, New Zealand Stocks

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