Global markets were slightly lower overnight as the US market dipped late in the day. The major news this morning was that the US Federal Reserve raised interest rates for the second time this year, as was widely expected. The Fed cited continued US economic growth and job market strength, as it proceeds with its first tightening cycle in more than a decade. The Fed however did cite weaker inflation, and overall the statement was slightly dovish.
Closer to home, both the Australian and NZ markets rallied yesterday with gains across most sectors. Bucking the trend was Agribusiness PGG Wrightson (PGW.NZ) which warned that earnings are now likely to hit the lower end of the company’s previous guidance due to adverse weather conditions, which we discuss below.
Stock in Focus: PGG Wrightson
Agribusiness PGW has warned that a wet autumn will weigh on the performance of its seed and grain business and earnings are now likely to hit the lower end of the company’s previous guidance. PGW said it expects operating earnings to now be in the bottom half of its earlier guidance of between $62m and $68m.
PGW had been tracking ahead of forecast before autumn, but the wet month of April made crops difficult to harvest and paddocks challenging to work, which has weighed most heavily on the seed and grain division.
While the announcement was disappointing, risks such as adverse weather are unavoidable in the agricultural sector. In saying that, weather effects are most likely to have a shorter-term impact on PGW’s profitability, and the long-term PGW investment case remains very much intact, in our view.
Members should look out for our full update on PGW to be released in our weekly report.
Click here now to login and view our Reports & Portfolio Holdings
Australia & New Zealand Market Movers
The Australian share market added to recent gains on Wednesday (ASX 200 index +1.06%) as the ASX 200 rallied back above the 5800 index level. Leading the market was strength across the Big 4 banks, while biomedical shares CSL and Resmed hit fresh all-time highs. Telstra shares remained under pressure as the company announced it planned to cut 1400 jobs in order to cut costs.
The New Zealand market rallied yesterday (NZX 50 index +0.59%) as stocks such as Air New Zealand and Tourism Holdings powered higher. In terms of economic data, New Zealand food prices rose at their fastest annual pace in more than six years as increasingly expensive vegetables were made more scarce by the wet Autumn weather. Poultry prices, which are trading at near 10-year lows also rebounded +15% in May.
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