Global markets were generally higher overnight as investors continue to digest quarterly earnings announcements and US President Donald Trump's plan to slash taxes seems to be making progress. After hours, technology giants Amazon, Google-parent Alphabet, and Microsoft have all jumped (with Amazon shares up +8%) as they reported what look to be strong profit results this morning.
Once again, earnings will be closely watched this week with a number of heavy weight US companies reporting quarterly profits. Given the high level of the market the current US earnings season as important as ever in terms of supporting company share price valuations.
Stock in Focus: ANZ Bank (ANZ:AX / ANZ:NZ)
Yesterday saw ANZ release its profit figures for the 2017 financial year.
The result largely met expectations with an 18% rise in its annual cash profit to $6.94 billion, although there was a drop in the bank's net interest margin, a measure of the profitability of its lending activity which fell to 1.99%. The bank also said it is closely watching its mortgage book for signs of stress as household debt levels continue to rise.
ANZ has been our preferred pick of the big 4 Aussie Banks. In part because of its strong capital position and the prospect of return of capital to shareholders. ANZ’s increased profits come as the group reduces its Asia businesses and sells off other unproductive assets. ANZ is looking at what to do with the cash divestments, and said it is looking at capital management options as it pockets the proceeds and refocuses on domestic retail banking. Special dividends or share buybacks would be obvious choices, in our view.
We are currently BUY rated on ANZ.
Members should look out for our full update on ANZ to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market was higher yesterday (ASX 200 index +0.18%) as shares pulled off early lows to advance again on Thursday, as gains from healthcare and consumer staples stocks offset earnings-related losses from ANZ and Qantas. It's the 13th session of gains in 15 for the ASX, with the index having decidedly broken out of a turgid trading range more than two weeks ago amid a pickup in global sentiment. Qantas shares closed down 1.5% after the airline cautioned on revenue growth trends in the second half of its financial year.
The New Zealand market fell on Thursday (NZX 50 index -0.33%) dragged lower by Fletcher Building. In stock news, Freightways dipped as it said sales and profit rose in its first quarter, putting the courier and information management company on track for annual earnings growth. Net profit was $15.1m excluding certain items in the three months ended Sept. 30 from $14.1m a year earlier, while operating revenue rose 7% to $143m.
3 Things Markets Will be Watching this Week
1. Quarterly US corporate profit announcements, with the level of the market making the current earnings season as important as ever.
2. Australian inflation data is published on Wednesday.
3. The European Central Bank makes an interest rate decision on Friday.
Have a Great Day,
Team