Australia and New Zealand Market Movers is provided by: Australasian Trading Management.
The Australian share market sold off yesterday (ASX 200 index -0.51%) as investors awaited the overnight decision on interest rates from the US Federal Reserve. Interest rates will not rise until there are clear signs of wage growth moving towards 3%, Reserve Bank Governor Philip Lowe said yesterday as he raised concerns about businesses falling behind the technology curve and cutting costs through wages. In terms of stock moves, infant formula shares such as Bellamy’s Australia were sharply lower.
The New Zealand market was slightly higher on Wednesday (NZX 50 index +0.21%) with the NZX 50 market index hitting a new record. Gains were led by Comvita and Summerset Group, which offset weakness in A2 Milk. In stock news, Restaurant Brands rose to a new record as it said it signed another master franchise agreement with Yum! Brands for the continued operation of the Pizza Hut brand in New Zealand. The local firm will continue to run marketing and operations for the brand in New Zealand and will step into the position of franchisor to existing independent franchisees and provide development support to new franchisees.
Global markets were lower overnight as shares on Wall Street pulled back with the big market news this morning being the US Federal Reserve (Fed) policy announcement.
The Fed increased its benchmark overnight lending rate a quarter of a percentage point to a range of 1.75% to 2%, as was widely expected. It also shifted its wording as the Fed dropped its pledge to keep rates low enough to stimulate the economy “for some time”, and Fed Chair Jerome Powell said in a press conference that “the economy is doing very well”.
More importantly, the Fed is indicating that there will be 2 more hikes this year, taking the total number of potential interest rate hikes to 4 for the year. As we touched on yesterday, we see the pace of interest rate moves higher (driven by the US) as a key driver of markets this year. All else equal higher interest rates are a negative for the economy and stock markets, although the pace of moves is crucial in terms of the market impact. We are watching developments closely.
Stock in Focus: Metro Performance Glass (MPG:NZ)
Shares in Metro Performance Glass (MPG) appear to be in recovery mode, potentially indicating the worst may be over after hitting an all-time low earlier this year.
MPG shares have once again risen as investors were relieved that while Its full-year profit fell -16% to $16.3 million, this was in line with guidance it gave in April (and not another downgrade). MPG said earnings will be relatively unchanged this year as the company beds in its “back to basics” strategy – saying it is shifting from “expansion and diversification, to optimisation and enhancement of our internal capability to execute”.
As we discussed in our last report on MPG, we believe there is a lot of negativity being priced into the share price as the market appears to have lost faith in management who have performed very poorly, and we view the recent departure of the Nigel Rigby (CEO) as a positive in terms of refreshing MPG’s management team. If MPG can find more capable leaders and execute with a supportive medium-term construction backdrop there is potential for a turnaround, in our view.
3 Things Markets Will be Watching this Week
1. Geopolitics as US President Trump meets with North Korean Leader Kim Jong-un on Tuesday.
2. The US Federal Reserve makes an interest rate decision Thursday morning (AU/NZ time)
3. Trade tensions with the US remain in focus following the G7 summit over the weekend.
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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