Global markets sold off overnight as volatility returned to markets. Stocks fell for a second straight day, hit by concerns around rising US bond yields and a decline in healthcare companies.
Given we have had one of the fastest starts to a calendar year for the US market in 2018, some profit taking is to be expected (at the time of writing the S&P 500 is still up a massive +5.7% in January).
The CBOE Volatility Index, the most widely followed gauge for market volatility rose to as much as 15.42, its highest level since August last year. As we pointed out in our recent Year Ahead Outlook report, it has been remarkable period of extremely low volatility for markets and while we expect positive share market returns, we expect volatility to return to markets in 2018. (our full outlook report can be read in the member area of our website).
Stock in Focus: CSL Limited (CSL:AX)
Healthcare giant CSL has been one of the top performers on the ASX in recent times.
There have been a number of pieces of recent news flow for CSL. Firstly, the market is expecting that the U.S corporate tax cut announced in December will benefit CSL’s bottom line profits. The European Medicines Agency’s Committee for Medicinal Products for Human Use has also given a positive use extension recommendation to CSL for its Hizentra product. Finally, a severe flu outbreak in U.S is likely to send CSL’s vaccine business, Seqirus, into its first profit.
CSL will release their half year earnings report released on February 14.
We currently have a BUY rating on CSL as a defensive healthcare holding.
Members should look out for a full update on CSL to be released in today’s weekly report.
Australia & New Zealand Market Movers
The Australian share market sold off yesterday (ASX 200 index -0.87%) as the ASX 200 market index headed back towards the 6000 level. Selling was quite broad-based as investors turned defensive. Miners were the worst performers by sector on a day of broad-based losses, with big names such as BHP and South32 selling off. In stock news, shares in Village Roadshow plunged after the company warned its half year results will be "substantially below" the previous year's. The company said it experienced challenging conditions at its Gold Coast and Sydney theme parks, and in its Village Cinemas business.
The New Zealand market was lower on Tuesday (NZX 50 index -0.35%) led lower by Trustpower and Kiwi Property Group, while Fletcher Building and a2 Milk gained. In stock news, Comvita was unchanged as the company said it expects to report a "significant turnaround" in its first-half results, with net profit over $3 million, and says it is tracking in line with its full-year guidance after good weather in December and January boosted the honey harvest.
3 Things Markets Will be Watching this Week
1. US earnings season gets into full swing – with a particular focus on company comments around the impact of US tax cuts.
2. The US Federal Reserve makes and interest rate decision Thursday morning (AU/NZ time).
3. Australian Inflation data is published Wednesday
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Have a Great Day,
Team