Global markets continued to sell-off on Friday, which saw US markets suffer the worst weekly losses in more than 2-years with the S&P 500 index down -6% and the Nasdaq down -6.5% for the week.
US stocks tumbled on concern that a trade war and higher borrowing rates could throttle global growth. While it is unclear whether the US will prove as decisive in imposing tariffs on Chinese imports as President Donald Trump has flagged, investors appear keen to step to the side-lines at least for the moment, spurring risk aversion. There is clearly uncertainty and risks around a trade war between China and the US – with China responding to US threats announcing plans for reciprocal tariffs on 128 US products and potential levies of $3bn on US goods exported to China.
Adding to the image of the ascendance of the "America first" faction, Trump replaced White House National Security Adviser H.R. McMaster with John Bolton, a controversial foreign-affairs specialist. For the week ahead global politics remain in focus as risks of a potential Trade War between the US and China grow. There are also a number of US Federal Reserve members due to make speeches this week, and investors will be looking for clues around the outlook for further interest rate hikes.
Stock in Focus: Kathmandu (KMD:NZ / KMD:AX)
Shares in Kathmandu (KMD) were higher last week as the outdoor equipment retailer successfully raised $40m through an institutional share placement of approximately 18.5 million new shares which was well supported and oversubscribed. The placement was made at a discount of $2.16 per share and KMD also intends to raise as much as $10m selling shares to eligible retail shareholders in Australia and New Zealand. The funds raised will be used to pay for its purchase of US footwear supplier Oboz Footwear to expand the company’s presence in the US.
KMD has also announced it has increased first-half profit by 23%, in line with its forecast, as it discounted less products and lifted margins. Under the management of chief executive Xavier Simonet, the company has been taking a more cautious approach to stock levels after earnings slumped in the July 2015 year as a build-up of inventory forced it into aggressive discounting at lower margins to rid itself of excess product. “Striking the right balance between generating sales growth and improving our gross margin has fuelled healthy earnings growth in the first half," Simonet said.
We currently have a HOLD rating on KMD.
Members should look out for our full update on KMD to be released in this week’s weekly report.
Australia & New Zealand Market Movers
The Australian share market was hit hard on Friday amid the global sell-off (ASX 200 index -1.96%) on the back of nervousness about a potential global trade war. Both of the ASX 200 heavyweight sectors, the banks and the miners, fell heavily on Friday, with banks taking 44 points off the index and miners dropping 28 points as the ASX lost about $34 billion over the session.
The New Zealand market dropped on Friday (NZX 50 index -0.99%) following global moves with Synlait Milk and Sky Network Television leading losses while insurer CBL remained in a trading halt as its administrators gained more time to consider its finances. In other news, Auckland Airport gained shares were a touch higher as it released its February monthly traffic update showing domestic passenger numbers lifted 7.5% and international passengers rose 6.7%.
3 Things Markets Will be Watching this Week
1. Global politics remain in focus as risks of a potential Trade War between the US and China grow.
2. A number of US Federal Reserve members due to make speeches this week, and investors will be looking for clues around the outlook for further interest rate hikes.
3. US GDP data and personal inflation data is released on Wednesday
Have a Great Day,
Team