Global markets were lower overnight, with the Tech sector outperforming as investors assessed changes to the Senate's version of a tax overhaul that could reduce gains for companies.
Closer to home, yesterday saw both the Reserve Bank of Australia and Reserve Bank of New Zealand make comments. The RBA kept interest rates on hold as Reserve Bank governor Philip Lowe reiterated "the low level of interest rates is continuing to support the Australian economy". We continue to forecast no change to rates in the near term.
A speech from the RBNZ also highlighted a new assumption that global inflation will stay lower for longer means it is more exposed to the risk of prices picking up, said Acting Governor Grant Spencer. "More recently we have been assuming greater persistence in low global inflation and this is contributing to our current flat track for future OCR levels". The RBNZ currently sees the official cash rate remaining at a record-low 1.75% until mid-2019.
Stock in Focus: Delegat Group (DGL:NZ)
Shares in Delegat Group, New Zealand's largest listed winemaker, continued to trend higher yesterday as the company lifted its 2018 earnings guidance, saying it is benefiting from sales growth and a weaker kiwi dollar.
Operating profit in the 12 months ending June 30 2018, is now expected to be $40.7 million, and DGL is on track to reach its full-year target of lifting case sales by 5% to 2.78 million cases. The company has a target of lifting sales to 3.69 million cases by 2022, driven by growth in sales of Oyster Bay wines in North America and Barossa Valley Estate sales globally.
We were pleased with what was a solid update, and continue to hold a positive view on DGL as it builds a leading premium wine company and as a beneficiary of a weakening NZ dollar.
Members should look out for a full update on DGLto be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market remained in negative territory on Tuesday (ASX 200 index -0.23%) with continued selling across the big four banks offsetting gains made by the retailers on a day where the Reserve Bank of Australia kept interest rates on hold. The arrival of Amazon to Australia failed to stifle retailers who shot higher following stronger-than expected retail sales data for October. In other equities news, G8 Education rebounded 5.3 per cent following Monday's savage loss after a profit downgrade
The New Zealand market was a touch lower yesterday (NZX 50 index -0.11%) led downwards by Xero and A2 Milk Co, while Scales Corp gained after a guidance update. Scales Corp said it now expects full-year earnings to be at the upper end of guidance between $55 million and $62 million on the performance of its horticulture division and new acquisitions.
3 Things Markets Will be Watching this Week
1. The Reserve Bank of Australia makes its last interest rate decision of the year on Tuesday.
2. Australian GDP data for the 3rd quarter is released on Wednesday.
3. Closely monitored monthly US employment data is published at the end of the week.
Before we sign off today we would like to congratulate our client Lolo Saulala for winning the Auckland University of Technology (AUT) Investment Club challenge, great work!
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Have a Great Day,
Team