Global markets initially surged overnight but pared gains late in the day. Strength in technology shares and a softer stance by US policymakers on China trade tariffs powered an early rebound on Monday, however shares sold off after reports the FBI raided the office of President Trump's long-time personal lawyer, seizing records related to several topics including payments to a pornographic-film actress.
On the trade battle front between the US and China, investors will be awaiting a speech from China's president Xi Jinping today for any further signals around China’s stance.
US corporate earnings season also kicks off later this week with the major banks being first to report profits. Key to a continuing bullish outlook has been expectations that first-quarter US corporate earnings will remain solid. During earnings season investor attention usually shifts away from other news headlines and back towards company fundamentals.
Stock in Focus: Woolworths (WOW:AX)
Shares in retail giant Woolworths (WOW) were up slightly after posting their recent 2018 first half results, which were better than market expectations.
Looking at the details, group sales from continuing operations were up +3.8% from last year to $29.8Bn, due to strong performance in their largest business division – Australian Food. WOW’s investment into store revitalisation and online sales resulted in strong earnings growth which offset another period of losses experienced by Big W. The result highlights the tough macroeconomic environment for WOW, particularly for Big W, which appears to struggle against competition from Target and Kmart. Further the arrival of Amazon into Australia creates another large uncertainty for the industry.
While WOW has done well to improve its supermarket business by revitalising stores and growing their online sales, eventually we believe WOW will succumb to greater industry pressures.
We currently have a SELL recommendation on WOW.
Australia & New Zealand Market Movers
The Australian share market was higher on Monday (ASX 200 index +0.35%) as CSL led the market climb after a major broker house upgraded their price target for the stock. All four banks posted losses earlier in the day but Commonwealth and Westpac were able to make gains throughout the day.
The New Zealand market rose on Monday (NZX 50 index +0.73%) as the local index joined a region-wide rally on optimism the US and China will manage to avoid a trade war that could slow global growth. Sky Network Television, Fisher & Paykel Healthcare and Spark NZ led broad-based gains. Orion Health jumped another 11% following recent news that it was pursuing "potentially significant transactions".
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. Earnings season begins in the US again later this week, with the major banks being first to announce quarterly profits.
3. Important US inflation (CPI) data is released on Thursday.
Have a Great Day,
Team
The charts in this email are provided by Trading View. We believe that for the price Trading View offers a great charting service for New Zealand and Australian stocks. We have a referral arrangement in place with Trading View. You can click here to be taken through to the link to give their service a free test drive.