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Australia (ASX) & New Zealand (NZX) Market Movers – 3rd May

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

The Australian share market made gains on Wednesday (ASX 200 index +0.60%) and closed in on its highest level for the year. There were a number of company updates and presentations yesterday including: Aristocrat Leisure which saw its shares rise 3% on the back of positive broker notes from its investor day. Wisetech Global recorded its second solid day of growth after it upgraded revenue growth guidance for the year. On the flipside, JB Hi-Fi shares fell following poor growth results. Shares in Invocare also fell after the company cut profit forecasts as funeral sales fell and as it said first quarter gross sales were down 6% year on year.

The New Zealand market rose on Wednesday (NZX 50 index +0.70%) with Gentrack Group hitting a record and electricity companies Mercury New Zealand and Contact Energy posting gains. Mercury rose as the electricity generator and retailer said it will spend as much as $50 million buying back shares, enabling it to return capital to shareholders and to rebalance its capital structure. Mercury will buy up to 20 million ordinary shares on the NZX main board between May 7 and June 30, which will be held as treasury stock and is a sign that management see value in buying shares on the market

Those who have followed us for some time will know one of our long standing medium-term views is that the Aussie dollar and Kiwi dollar will continue to weaken versus the US dollar. Our view is based on interest rates, as all else equal a higher cash rate on a currency increases the return generated by holding cash and hence the attractiveness of that currency. Now that the Fed is clearly in rate hiking mode, we see this creating further upward pressure on the US dollar, while both the Reserve Bank of Australia and New Zealand appear to have rates firmly on hold (with the interest rate differential between the USD compared to the AUD & NZD set to flip in the near term – i.e. the interest rate earned on US dollar cash will be higher than that on the Aussie dollar and Kiwi dollar).

Given this view, we are positive on currency sensitive sectors such as offshore earning companies, exporters, and the tourism sector.

Stock in Focus: Qantas (QAN:AX)

A number of stocks released updates in Australia yesterday, with national airline Qantas (QAN) being one of them. QAN led the market higher, jumping +8% as it said it is on track to record a record pre-tax profit this year after its third quarter revenue lifted 7.5%.

QAN has flagged full-year profits between $1.55 billion and $1.60 billion. The company also ordered six more Boeing 787 Dreamliners, worth more than $2 billion as it works to replace the last of its 747 fleet and looks set to continue a large share buyback program.

Global Markets Digest

Global markets were mixed overnight as stocks fell after the US Federal Reserve (Fed) released its latest decision on monetary policy. Stocks on Wall Street edged higher as Apple led with a 5% gain post earnings, although gave back advances in the final hour of trading post the Fed announcement.

The Fed’s decision to leave its benchmark lending rate in a target range of between 1.50% and 1.75% was unanimous and widely expected by the market. The Fed pointed to higher inflation ahead, noting that “overall inflation and inflation for items other than food and energy have moved close to 2 percent.” This was an upgrade from the March meeting and important as the Fed considers 2% to be a healthy level of inflation and a key for continuing to push rates higher. While stock markets were lower on the news, the US dollar continues to show strength.

3 Things Markets Will be Watching this Week

1.                  Corporate earnings season continues in the US this week.
2.                 The Reserve Bank of Australia makes an interest rate decision Tuesday.
3.                 The US Federal Reserve holds its latest monetary policy meeting mid-week.

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, International Stocks & Other, New Zealand Stocks

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