Global markets were generally higher overnight as risk-on sentiment returned to Wall Street with a broad-based rally.
Helping positive investor sentiment was news which suggested that for all the president's bluster on Twitter there might not be any official action from the White House against Amazon, one of the country's largest companies. Tesla shares were also higher, putting an end for now to its recent slide after it signalled it did not expect to have to raise any more capital this year and after it signalled that production of its Model 3 sedan was progressing.
Closer to home, the Reserve Bank of Australia made a widely anticipated decision to hold rates steady at 1.5% for a record 18 straight meetings. The Aussie dollar was little changed on the news, and once again we forecast little change to cash rates in both Australia & NZ in the near term.
Stock in Focus: Metro Performance Glass (MPG:NZ)
Metro Performance Glass (MPG) shares were higher yesterday as it said its full-year normalised net profit was $18m to $18.5m on the back of weaker-than-expected Australian performance as well as some unexpected costs related to a change in leadership. MPG had previously forecast profit of $18.5m to $20m in the year to March 31 versus the prior year's $21.3m.
While the news was negative, the low level of the current share price and track record of management disappointing investors in recent times actually saw a positive share price reaction (a lot of bad news is being reflected in the current share price).
Former CEO Nigel Rigby had previously announced he was leaving the company – which we see as potentially a positive given MPG clearly as management issues. However, we are frustrated that a portion of the latest profit downgrade is being partly attributed to paying Mr Rigby his contractual entitlements of one year’s salary as well as consideration for a restraint of trade. Metro Glass will provide more detail on the results when it announces its full year result on May 24.
We currently have a High-Risk BUY rating on MPG.
Members should look out for a full update on MPG to be released in an upcoming weekly report.
Australia & New Zealand Market Movers
The Australian share market was in negative territory on Tuesday (ASX 200 index -0.13%) as shares managed to claw back the bulk of early losses on Tuesday to end marginally lower, thanks largely to strong support for the big miners and a takeover offer for gas company Santos. Santos's 16% surge provided a further impetus for the local bourses recovery as it returned to trade late Tuesday morning after confirming a $6.50 bid from US consortium Harbour Energy.
The New Zealand market was a touch higher yesterday (NZX 50 index +0.13%) as shares were mixed with A2 Milk bouncing after recent selling while Orion Health Group sank to a record low. A2 Milk said that in light of recent media coverage around competition from Nestle, that it "is confident that the past investment in its brand has established a strong consumer franchise which will continue to strengthen as its level of investment and distribution continues to grow", and said it "continues to perform strongly in each of its key markets and in particular has not seen any change in the growth of its China business"..
3 Things Markets Will be Watching this Week
1. Global politics remain in focus with tensions rising between the US and China as they impose trade tariffs on each other.
2. The Reserve Bank of Australia makes an interest rate decision on Tuesday.
3. Monthly US employment figures are released at the end of the week
Have a Great Day,
Team