Global markets rallied strongly overnight with US technology stocks leading the charge as strong earnings from Netflix and UnitedHealth boosted optimism over what is expected to be the strongest earnings season in seven years.
Once again, the latest round of US corporate results will be key to supporting equity markets. If companies are able to surprise on the upside in a phase of higher expectations it would be a real sign of strength. Hopes about a strong reporting season have helped divert attention back to company fundamentals (which remain solid) from geopolitical and trade worries, which have roiled the markets in recent months.
In other news, China's economy grew at a slightly faster-than-expected pace of 6.8% in the first quarter, buoyed by strong consumer demand, healthy exports and robust property investment.
Stock in Focus: Netflix (NFLX:NASDAQ)
Shares in Netflix have jumped +9% to new all-time highs overnight as the company reported that a blitz of new programming attracted a surprisingly high 7.4 million new customers from January to March, reassuring investors who are believe the video streaming pioneer’s massive spending will fuel growth around the world.
It was another excellent quarter for Netflix as the company continues to outperform expectations. The majority of growth is now coming internationally, as Netflix increase their partnerships to expand reach and awareness overseas, while introducing quality new content both domestically and abroad to meet the diverse taste of their global subscribers.
We currently have a BUY (High-Risk) recommendation on Netflix.
Members should look out for a full update on Netflix to be released in this afternoon’s weekly report.
Australia & New Zealand Market Movers
The Australian share market was flat on Tuesday (ASX 200 index +0.00%) with the benchmark once again failing to stretch to a third consecutive session of gains. The mining sector was again the stand-out as base metal prices moved higher. The royal commission into the financial services sector continued on Tuesday and the sector came under more selling pressure, with AMP losing 4.4% after the company was grilled again over its deliberate practice of charging clients fees for financial advice without providing services in return. Bank of Queensland dropped 2.4% after its first-half cash profit missed market expectations.
The New Zealand market sold off yesterday (NZX 50 index -0.74%) as investors weighed up the impact of Fletcher Building's deeply discounted rights issue soaking up demand from the broader market. Restaurant Brands NZ fell 0.8% after reporting a 37% increase in annual profit and signalling plans to keep expanding in Australia and the US.
Fletcher announced a $750 million rights issue at a 23% discount to the last trading price of $6.27, with an institutional offer running until Thursday, and trading of the shares halted until Friday. The capital raise is part of a $1.25 billion refinancing plan shoring up the construction company's balance sheet having drawn $280 million in the first three months of this year alone. Fletcher also announced plans to sell Formica and its steel roofing tiles business. We will be releasing a full update on Fletchers in today’s weekly report.
3 Things Markets Will be Watching this Week
1. Corporate earnings season has kicked off in the US, with the major banks being first to announce quarterly profits.
2. Chinese GDP data is published at the start of the week.
3. The latest Australian unemployment figures will be announced on Thursday.
Have a Great Day,
Team