Global markets were little changed overnight as Wall Street recovered from an earlier decline amid fresh concerns about ties between President Donald Trump’s administration and Russia. Donald Trump Jr. released emails he exchanged ahead of a meeting with a Russian lawyer last year that indicated the Russian government was backing his father’s presidential campaign and trying to damage his opponent. The news creates political uncertainty, and is likely to hinder progress with the Trump/Republican administrations reform plans.
At the same time, a rebound in major commodity prices saw the Mining and Energy sectors outperform, which should translate into another strong day for the Aussie mining stocks today.
As we touched on yesterday, markets seem to be in “wait and see” mode ahead of US Fed Chair Janet Yellen’s testimony and US earnings season which kicks off at the end of the week.
Stock in Focus: Coca-Cola Amatil (CCL.AX)
Coca Cola-Amatil suffered a dual blow last week, losing a supply contract with Australian pizza giant Domino's to Pepsi, and failing to get its latest no-sugar offering onto Woolworths' supermarket shelves. CCL shares have been under pressure this year and the latest news did not help the situation.
Coca-Cola has been pushing its “No Sugar” marketing message in response to consumers’ growing avoidance of sugary diets and especially sugar-heavy fizzy drinks. However, Woolworths is reportedly refusing to stock Coca-Cola’s latest “Coca-Cola No Sugar” product that is being lined up to replace Coke Zero, given the number of other Coca-Cola range products already on offer on their shelves.
Given Dominos is a major customer of CCL, it has been reported that Coke drink volumes may fall by up to 3%, which has been the larger driver of the recent share price drop in our view.
We are currently HOLD rated on CCL, although believe CCL offers an attractive opportunity for income/dividend seeking investors.
Members should look out for our full update on CCL in today’s weekly report.
Australia & New Zealand Market Movers
The Australian share market was slightly higher yesterday (ASX 200 index +0.08%) as a jump in commodity prices provided support for mining shares while the wider market traded in a tight range.
The New Zealand market rallied on Tuesday (NZX 50 index +0.59%) led by A2 Milk's continued strength along with Kathmandu Holdings hitting a 2.5 year high and Air New Zealand shares continued to soar. A2 Milk has gained 80% this year as it has found success selling infant formula into China, while its competitors have struggled with that country's regulatory regime. Yesterday saw one of the major brokers upgrade their rating on A2 to a “Buy”, which would have supported the share price.
3 Things Markets Will be Watching this Week
1. How the US Technology sector trades following recent volatility.
2. Fed Chair Janet Yellen will give her testimony to the House of Representatives late in the week
3. US Earnings season kicks off on Friday.
Have a Great Day,
Team