Daily Market Insights
Global markets were mixed overnight as the US market ended higher after former FBI director James Comey’s statement to the Senate did not bring up any new information which could be used against Donald Trump. It appears as though Comey’s comments were already being expected by the market.
Investor sentiment remains fragile as the UK heads to the polls this evening after Theresa May called for a snap election. The Polls are giving mixed signals, with the Conservatives lead narrowing over Labour.
Closer to home the ASX has suffered quite a dramatic reversal of fortunes since the start of May, as the Australian has market virtually given back all its gains experienced in 2017.
The ASX was heading for another down day, until shares were buoyed by economic growth figures which weren’t as bad as some had feared. The release of Australian economic growth figures (GDP) showed the economy grew by 0.3% in the first quarter of the year. These figures while weak were as expected and also saw the Aussie dollar continue to move higher with a relief rally across shares.
Stock in Focus: Wesfarmers (WES.AX)
Wesfarmers was the biggest drag on the ASX yesterday, as its shares fell after the group at its strategy day flagged falling margins at Coles due to rising investments as well as losses at its UK hardware business
Coles has tripled its investment into cutting prices and improving service to protect its market share. It is likely that a full-blown grocery market price war is on the cards.
We have been cautious on the supermarket sector given the entry of German discount supermarket Aldi, and a full-blown price war is unlikely to benefit either Wesfarmers or Woolworths, in our view.
We are currently HOLD rated on Wesfarmers and SELL rated on Woolworths.
Members can login to read our latest reports on WES & WOW.
Australia & New Zealand Market Movers
The Australian share market ended the day more or less flat (ASX 200 index -0.01%) as the market recovered from early losses following the release of quarterly GDP data. In other stock news, troubled Telco Vocus Group saw its share jump +21% as it received a takeover offer from private equity firm KKR.
The New Zealand market was lower yesterday (NZX 50 index -0.36%) led lower by Sky Network Television as the pay-TV operator sank to a nine-year low after a significant shareholder sold down while Steel & Tube Holdings fell on news of court charges over its steel mesh. Steel & Tube is facing 29 court charges of making false and misleading representations about its steel mesh product SE62. The Commerce Commission filed the charges in the Auckland District Court under the Fair Trading Act, relating to conduct between March 1, 2012, and April 6, 2016. The news dented confidence and there are questions around the uncertainty of costs and whether there will be a material impact
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