Global markets traded in a narrow range overnight as investors await a heavy week in terms of earnings announcements in the US from the likes of Apple and Tesla. As we touched on yesterday US profit figures have been sound so far, with 73% of major US companies (those part of the top 500 – S&P500) reporting quarterly results which were ahead of analyst expectations.
July has been a strong month for the US market with the Dow Jones, S&P 500 and Nasdaq all closing at fresh record highs. However, closer to home the Australian market continues to lag, with the market losing -0.2% in July (measured by the ASX 200 index). At the same time, the NZ market (measured by the NZX 50) managed to gain +1.0% over the month.
Stock in Focus: Macquarie (MQG.AX)
Last week saw Macquarie release a trading update which was received positively by the market.
MQG said that it expects 2018’s profit result to be broadly in line with the record net profit of $2.2 billion posted in the 2017 financial year. In the 2017 financial year MQG delivered total dividends of $4.70 and we would expect a similar payout ratio of 72%, which equates to a healthy 5% dividend yield.
It was a pleasing update, although we do highlight that MQG shares are driven by volatile factors such as equity market conditions and exchange rate moves. The Australian dollar has lifted 5.5% versus its U.S. counterpart over the past month and if this remains at high levels is a big profit headwind for MQG with the group earning around two thirds of its revenues overseas.
We are currently BUY rated on MQG.
Australia & New Zealand Market Movers
The Australian share market ended Monday in positive territory (ASX 200 index +0.31%) as Resource stocks supported the ASX for most of Monday thanks to a surge in Chinese iron ore futures, which saw investors buy BHP Billiton in particular which hit a 5-month high. The prospect of a continued strong Australian dollar has given investors cause to sell off Treasury Wine Estates, which derives much of its earnings from overseas.
The New Zealand market made gains yesterday (NZX 50 index +0.71%) rose led by A2 Milk amid optimism it will stand to benefit from Chinese efforts to reduce the number of infant formula brands available in its market, while Xero reached a three-year high as investors were drawn back to its growth story.
3 Things Markets Will be Watching this Week
1. US Corporate Earnings season continues with stocks such as Apple and Tesla reporting this week.
2. Local earnings season kicks off across Australia & New Zealand.
3. The Reserve Bank of Australia makes an interest rate decision on Tuesday.
Have a Great Day,
Team