Global markets were higher on Friday as the US market moved to fresh highs with the Technology sector leading the charge.
Closely watched US employment figures sent investors mixed signals on the strength of the US labour market on Friday. The report showed that 138,000 jobs were added in May (which was below market expectations), with the jobless rate falling to 4.3%. The data saw the yield on US Treasuries drop to the lowest levels this year and the US dollar also sold off.
While the mixed jobs numbers are unlikely to deter the US Federal Reserve from hiking interest rates later this month, the market is beginning to question how many further rate hikes will be carried out this year. We will be watching developments closely as to whether the data was one-off in nature or a developing trend.
As we discussed last week, one of our main portfolio investment themes is that the current tourism boom is set to continue, and our tourism facing stocks (including airports & airlines) have performed strongly in both Australia and NZ to date. Sydney Airport (SYD.AX) is one example, which we discuss below.
Stock in Focus: Sydney Airport (SYD.AX)
SYD has recently announced that they will not take on the development and operation of the proposed Western Sydney Airport. The decision to not accept the proposal was said to be in the best interests of SYD’s shareholders. Given the terms set out, in our view the risks would be too great for SYD and it would take decades until investors could see any significant returns.
Previously there was an overhang on SYD’s shares price over the Western Sydney Airport proposal, which appears to have now been lifted. On top of that, air traffic performance throughout this year continues to show significant international passenger growth, in particular from Asia.
We are currently BUY rated on SYD shares.
Members should look out for our full update on SYD to be released in this week’s weekly report.
Australia & New Zealand Market Movers
The Australian share market made gains on Friday (ASX 200 index +0.87%) following the lead of positive moves globally. Iron ore futures halted a 6-day fall which saw some support for mining stocks.
The New Zealand market continued to move higher on Friday (NZX 50 index +0.66%) led by Fletcher Building and Restaurant Brands. Fletcher Building saw its shares recover, possibly signalling investors had become overly bearish on its outlook. Restaurant Brands continues to reach new heights after recently announcing record sales figures.
3 Things Markets Will be Watching this Week
1. Whether market continues to trend higher, with the US market continuing to reach new all-time highs.
2. Australian quarterly economic growth (GDP) figures are released on Wednesday.
3. The Reserve Bank of Australia makes an interest rate decision on Tuesday
Have a Great Day,
Team