Global markets were generally higher overnight as Technology Stocks on Wall Street rebounded while the oil price snapped its recent winning streak, weighing on the Energy sector.
Minutes from the last US Federal Reserve meeting were also released overnight, which showed policymakers were increasingly split on the outlook for inflation and how it may affect the pace of interest rate hikes going forward. We will be watching developments closely as one of our key investment themes is a stronger US Dollar on the prospect of higher interest rates.
Stock in Focus: Z Energy (ZEL.NZ / ZEL.AX)
As we touched on yesterday, Z Energy shares declined amidst uncertainty around increased regulation in the petrol sector. A government-commissioned study released yesterday found that New Zealand's fuel market "may not be consistent with a workably competitive market”, which saw Z Energy shares come under some selling pressure.
The study found retail margins increased over the past five years while more expensive petrol in the South Island and Wellington wasn’t explained by higher costs in those areas. The study's main recommendation was for the government to look further into the issue. Energy and Resources Minister Judith Collins said she plans to ask the commerce minister whether the Commerce Commission should undertake a further study once it is legally empowered to do so, and that she has instructed her officials to assess the recommendations and report back to her by November.
While it is too early to tell what the impact is going to be on Z Energy, it does create uncertainty which is likely to act as an overhang on the share price. The industry (including Z Energy) now has until September 30 to submit their case on the issues.
We are currently rate HOLD rated on Z Energy.
Members should look out for our full update on Z Energy to be released in our next weekly report.
Australia & New Zealand Market Movers
The Australian share market was lower yesterday (ASX 200 index -0.35%) as sabre-rattling over North Korea’s missile program saw investors seek out safe haven assets such as gold, but a strong day for the miners kept a lid on the ASX’s losses. In stock news, Flight Centre said it likely hit a record $20 billion in annual sales after its north American travel businesses achieved significant growth in the second half of the financial year. Shares in the Brisbane-based travel agency jumped to a 15-month high after an improved performance in the past six months led Flight Centre to upgrade its earnings guidance.
The New Zealand market retraced on Wednesday (NZX 50 index -0.33%) with North Korean tensions spooking investors as the US Independence Day holiday left markets lacking direction. Spark New Zealand and A2 Milk Co fell while Xero and ERoad gained. Tegel group also added to gains as concerns around a chicken glut ease.
3 Things Markets Will be Watching this Week
1. How the US Technology sector trades following the recent pullback.
2. Minutes from the US Federal Reserve’s June meeting will be released on Wednesday.
3. Important US employment data is released end of the week.
Have a Great Day,
Team