Global markets were mixed overnight, and Wall Street appears to be heading lower after trading higher for most of the day. This morning saw Federal Reserve chair Janet Yellen play a straight bat in her final policy review, keeping rates on hold while adding emphasis on plans to raise US interest rates. The initial market reaction was muted, although as highlighted the US market looks to have dipped heading into the close.
In other news, US President Donald Trump delivered a market assuring State of the Union address.
Both the Australian and NZ markets staged a large turnaround yesterday, up 0.25% and 1.7% respectively after opening lower on weak offshore leads. Trading turnover was also higher as market participants returned.
Stock in Focus: Treasury Wine Estates (TWE:AX)
TWE delivered another solid first half result yesterday, with net profit after tax up 37% to $187.2 million and has been our top performing Australian stock pick.
Looking at some of the details, first-half revenue of $1,336.6 million, was down 2.3% on the prior corresponding period. Encouragingly, operating earnings (EBITS) growth and margin accretion was experienced across all regions.
The highlight was its performance in the lucrative Asian market. Its Asia segment reported operating earnings growth of 48% to $117 million during the first-half. Furthermore, it enjoyed an operating earnings margin of 39.3%. Not only was this up 3.1 percentage points (ppts) on the prior corresponding period, but it was vastly better than any other segments. We have held a positive view on TWE for some time now, particularly give its strong market position in China tapping into the “dining boom” as the Asian pallet develops a taste for its red wine.
We currently have a BUY rating on TWE.
Members should lookout for a full update to be released on TWE in next week’s weekly report.
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Australia & New Zealand Market Movers
The Australian share market staged an afternoon recovery on Wednesday (ASX 200 index +0.25%) with a weaker-than-expected inflation print easing concern over the potential for near-term interest-rate hikes. The Consumer Price Index – the main measure of inflation in Australia, rose by 0.6% in the December quarter, below expectations for a lift of 0.7%. Inflation figures show retailers struggling as Australians focus on paying for the essentials. In stock news, electricity and gas company Origin Energy announced it has boosted half-year revenue 40% and lifted production 1%.
The New Zealand market rallied yesterday (NZX 50 index +1.73%) on a busier day than usual, marking the final day of trading for one-time market darling Xero. SkyCity Entertainment Group, Air New Zealand and Sky Network Television gained. Accounting Software developer Xero delisted from the local bourse yesterday, rising 0.3% to $34 on the NZX. The stock left the benchmark index last year, but remained on the wider index until Wednesday. It is now only listed on the ASX. Since its initial public offering at $1 per share in June 2007, the stock has gained an amazing 3,300%.
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.
Have a Great Day,
Team