Global markets were lower overnight as markets have started the week tentatively following what was a dramatic sell-off across US Technology stocks last Friday. Major Banks such as Goldman Sachs warned that low volatility was blinding investors to risks in the sector and profit taking has seen the Nasdaq (US Technology Index) suffer its biggest two-day loss since September.
As we mentioned yesterday, the Tech sector has been by far the strongest performer in 2017 as strong quarterly earnings helped technology stocks fill a void left by financial and industrial stocks after the post-election rally faded. The US Technology sector remains up about 17% this year and we are watching developments closely as to whether the sell-off translates into something more than a short term correction.
Closer to home it was a relatively quiet day in terms of news flow, with the Australian market closed for Queens Birthday Holiday.
In stock news, New Zealand's largest hydro electricity generator Meriden issued its monthly operating report for May. In the month, national electricity demand was 5.1% higher than the same month last year, while national hydro storage decreased to 74% from 90% of the historical average. The share price was relatively unchanged on the announcement. The NZ power “gentailers” have experienced a decent share price run since late last year, especially as investors have once again moved back into yield stocks. The Meridian announcement comes on the back of Mercury NZ’s (MCY.NZ) announcement last week which we discuss below.
Stock in Focus: Mercury NZ Ltd (MCY.NZ / MCY.AX)
Mercury (previously Mighty River Power) raised its 2017 earnings guidance for a third time based on increased hydro generation in the Waikato catchment. The company lifted its 2017 forecast operating earnings guidance by $10m to $52m. Hydro generation is now forecast to be 4,700 GWh for the financial year, or 700 GWh above annual average hydro generation.
MCY said that other 2017 guidance remains unchanged. While it was positive news the announcement seemed to have been more or less expected by the market.
While both Mercury & Meridian shares have performed well in recent times, we continue to prefer Genesis Energy (GNE.NZ / GNE.AX) as our top pick in the sector particularly given its diverse energy production base.
Members can login below to read our full reports on Genesis Energy (GNE.NZ / GNE.AX).
Australia & New Zealand Market Movers
The Australian share market was closed for Queens Birthday Holiday.
The New Zealand market was slightly lower on Monday (NZX 50 index -0.05%) in a quiet market without Australian investors, with Sky Network Television and Metro Performance Glass shares experiencing the day’s biggest gains. Sky TV experienced buying on the back of bargain hunting, however investors remain concerned with Sky TV and where it goes post rejection of the Vodafone merger.
3 Things Markets Will be Watching this Week
1. The US Federal Reserve makes an interest rate decision on Thursday morning AU/NZ time.
2. NZ quarterly economic growth (GDP) figures are released on Thursday.
3. How the US Technology sector trades following the sharp correction last Friday.
Have a Great Day,
Team