This will be the last daily market insights email for 2019, until we resume in mid-Jan. Thank you for your support this year and we wish everyone a Merry Xmas and prosperous New Year.
Global markets continued to generally trend higher overnight, as the Xmas rally for sharemarkets continues with investor confidence in the US economy reinforced with upbeat manufacturing and housing data.
The path to least resistance seems to be up right now, with some of the immediate risks removed – such as the UK election and the US-China trade war escalation.
The prospects for the world economy also look a bit brighter, with recent economic data out of the US and Europe suggesting the downturn in global growth may be bottoming. Looking ahead into the start of 2020, US corporate earnings season will be watched closely, and we note that 2020 earnings will be compared to a lower base of 2019 profit levels.
A key risk for markets remains sharply higher interest rates, although global central banks remain supportive and in the absence of an inflation shock we see interest rates around the world staying lower for longer – which will continue to support share markets and the economy.
Stock in Focus: TJX Companies (TJX:NYSE)
TJX shares continue to climb higher as the “off-price” retailer continues to deliver a solid set of numbers for the third quarter of the 2020 fiscal year and remains upbeat, lifting earnings guidance for the 2020 fiscal year - despite a challenging retail backdrop for others.
Fortunately for the TJX business model a slow down in traditional retail spending means consumers feeling the pitch are still after desirable goods but at a bargain. The “off-price” brick and mortar retailer appears to be immune to pressure caused by online giant Amazon, as its net sales for the quarter jumped +6.4% to $10.5 billion, by adding another 104 stores to its growing portfolio over the quarter has it ramps up for busy Christmas trading period.
Same store sales growth was up +4%, despite a slowdown from the previous year is still an impressive feat considering many brick and mortar retailers are feeling the pinch helped by improved foot traffic for bargain hunting consumers and increased levels of quality inventory on offer. TJX maintained strong gross margins with net earnings per share of $0.69 for the quarter, up +13.1% from last year and beating market expectations.
We maintain our BUY recommendation for investors seeking exposure to retail.
Members should look out for a full update on TJX to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian market was a touch lower on Tuesday (ASX 200 index -0.04%) as the rally took a breather, although miners were in demand as the outlook for the global economy brightened. The minutes from the RBA's latest interest rate meeting were released on Tuesday and paved the way for another interest rate cut from the central bank in February.
In stock news, Rio Tinto and the Tasmanian government are believed to be getting close to a deal on cheaper power for the struggling Bell Bay aluminium smelter. Rio is understood to be seeking a power price cut of >30% to keep the smelter open.
The New Zealand market rallied yesterday (NZX 50 index +0.3%) as NZ shares played catch up from the prior session's late outage, with heavier trading than usual. Economic data around confidence was strong, as headline business confidence in NZ was higher as a net 17% of firms expect stronger activity ahead with services and manufacturing the most optimistic. Construction was the weakest but is improving from a low base. Consumer confidence also jumped with Westpac’s headline index back in line with long term averages supported by a resurgence in the housing market.
3 Things Markets Will be Watching this Week
- US 3rd quarter economic growth (GDP) data is published.
- Minutes from the latest Reserve Bank of Australia meeting will be released.
- NZ 3rd quarter GDP will also be released.
Have a Great Day,
