Global markets were lower overnight as company earnings misses knocked sentiment on Wall Street.
We were not surprised to see some consolidation overnight in the US market which has had a decent rally over the past few days. Once again, we reiterate that the latest round of US corporate profit results will be key to supporting equity markets.
Technology stocks from Apple to chipmakers declined following a weak forecast on smartphone demand, while a sharp drop in Philip Morris's shares after results weighed on the consumer staples sector. A warning from Taiwan Semiconductor, the world's largest contract chipmaker and Apple supplier, on soft demand for smartphones and on the semiconductor industry's growth this year sparked a tumble in chip stocks.
Stock in Focus: Macquarie (MQG:AX)
Most of the Australian financial sector has been under pressure of late (particularly the Big 4 Banks and AMP) as the sector continues to face questioning at the ongoing Royal Commission into the industry. However, Macquarie (MQG) has bucked the trend and highlighted at their recent investor briefing that they expect another record profit result.
MQG continues to reap rewards as the investment bank benefits from its transformation to a more stable annuity style business. During its recent investor briefing, MQG upgraded its profit outlook for the 2018 financial year, expecting a +10% improvement on their record 2017 result. MQG also highlighted its long-term investment opportunities, focusing on Energy (particularly renewable energy), Infrastructure and Technology. Research suggests that global investment into these areas is set to be in the trillions of dollars over the next decade.
While MQG’s business is sensitive to volatile factors such as equity market conditions and exchange rate moves, conditions have continued to swing in MQG’s favour.
We currently have a BUY (High-Risk) recommendation on MQG.
Australia & New Zealand Market Movers
The Australian share market was in positive territory on Thursday (ASX 200 index +0.33%) with the ASX recording its fifth session in a row without a loss, as strong commodity prices helped lift mining stocks. Despite poor performances from the major banks on the back of the royal commission, aluminium and nickel both posted big gains over concerns the US may level more sanctions against Russia which bolstered the likes of BHP, Rio Tinto, South 32m and Alumina. Next DC shares were lower after it was hit with legal action by Asia Pacific Data Centre Group.
The New Zealand market was slightly higher yesterday (NZX 50 index +0.04%) with growth-linked companies including Synlait Milk, A2 Milk, Comvita leading gains in the local market. Scales Corp, the apple grower and exporter, rose as the company said it is eyeing potential agribusiness acquisitions that would fit well with its export apple business. "We think New Zealand agribusinesses are in a good space, they make good products, and sell them to Asia… We have over the years developed our skills around exporting and dealing with Asia, particularly China, and we are looking at businesses within New Zealand that would work with those sort of dynamics and be complementary to our apple business".
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