Australia and New Zealand Market Movers is provided by: Australasian Trading Management.
The Australian share market was lower on Friday (ASX 200 index -0.33%) ending the last day of the fiscal year with a loss. Markets were led led lower by losses from CSL, ANZ and Macquarie which all reversed some strong gains made in recent weeks. In stock related news, former Wesfarmers boss Richard Goyder will be the new chairman of Qantas, succeeding the outgoing Leigh Clifford in October.
The New Zealand market sold off on Friday (NZX 50 index -0.62%) as the market ran out of steam on the last day of the quarter, with Summerset and Ebos Group declining while Fonterra shares reversed some losses. Fletcher Building shares were slightly lower as it sold its stake in the Sims Pacific Metals recycling unit to partner Sims Metal Management for $42 million. Gentrack also declined after the utilities software developer said some contracts close to being finalised will add to earnings in the September 2019 year.
Global markets were higher on Friday as a surge in Nike shares and a rally in bank stocks lifted Wall Street’s major stock indexes, while concerns over US international trade relations ebbed. For the quarter, all the major US market indices made gains, with the small cap Russell 2000 index and Nasdaq Technology index leading gains.
Local Australian/New Zealand currencies continued to fall over the weekend as the US dollar showed more strength amid trade tensions and as investors focus on US Federal Reserve rate rises. For the NZ dollar, as we discussed on Friday, a change of tone suggests the Reserve Bank of NZ may now be more willing to cut rates if need be, and while not our base case assumption, the chance of an interest rate cut is no longer insignificant, in our view.
Stock in Focus: ASX & NZX Half Year Update
Given we are half way through 2018, rather than focus on a stock today we are providing a brief update on the broader market and our outlook for the rest of the year.
Despite heightened market volatility at the start of the year, both the Australian and NZ markets are up +2.1% and +6.5% for the 2018 year respectively. For the NZX it has been the strongest quarterly performance in more than two years, with a three-month run of +8% to new record highs. The ASX has been playing catch up, breaking out to 10-year highs as it rebounded +7.5% for the June quarter.
For the Australian share market technology stocks were among the best performers on the market for the period, mirroring the success of US counterparts. Mining stocks have staged a remarkable comeback over the last couple of years and offset weakness across the banking sector and Telco stocks. We believe mining stocks should continue to perform well, particularly at the late stage of the economic cycle when commodity prices usually increase with inflation.
For NZ, while the market continues to break records we still see opportunities. We remain particularly cautious on the power generator sector and in an environment of higher interest rates we see these stocks coming under pressure. We continue to favour stocks in the tourism space, an area which continues to boom. The recent fall in the NZ dollar should only provide another boost for the sector, in our view.
As we head into the second half of the 2018 calendar year, the key risks for stock markets remain relatively unchanged. Firstly, we continue to watch interest rates, particularly the pace of moves by the US Federal Reserve. All else equal higher interest rates are negative for stock prices and the economy as it increases the cost of borrowing and reduces valuations. Secondly, global trade tensions continue to escalate. The impact and magnitude of trade related risks are more uncertain although it is widely accepted a global trade war would be a negative for global economic growth. We are watching developments closely.
3 Things Markets Will be Watching this Week
1. Ongoing trade disputes, particularly tariff measures between the US and China continue to sway investor sentiment.
2. The Reserve Bank of Australia makes an interest rate decision on Tuesday.
3. Important monthly US employment figures are published at the end of the 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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