Global markets were mixed overnight as the major US market indices were little changed.
Wall Street's three major indexes struggled for direction as Treasury yields inched up to levels (with the 10-year yield closing in on 3%) that have spooked investors in recent months. The move higher in US interest rates also saw the US dollar strengthen to its highest levels in about 3-months versus both the NZ dollar and Aussie dollar. One of our long-held investment themes has been for a stronger US dollar versus the AUD & NZD over the medium term.
Markets also continue to digest corporate earnings announcements in the US, and as touched on yesterday a number of large Tech companies will be reporting results. With 87 S&P 500 Index companies having reported first quarter 2018 results, earnings for the quarter are tracking to an impressive 20% year-over-year increase, above the 18% expected heading into earnings season. The strong increase is being driven primarily by solid economic growth, a weak U.S. dollar, and the new tax law.
Stock in Focus: Kogan (KGN:AX)
Shares of Kogan.com (KGN), the Australian online retailer dropped 17.7% yesterday on huge trading volume after the company released its third-quarter cashflow statement.
Revenues for the quarter surged 46.6% year on year to AU$108 million with the company reporting strong mobile uptake and customer numbers. However, investors were spooked by negative cashflow of $625,000 with management pointing to seasonality and a "normal payables pattern" after the Christmas period.
The announcement illustrates the volatility which can be experienced when investing in a high-flying growth stocks, where market expectations are usually elevated after a strong run. Long term holders of the stock may still have reason to smile with the stock still up 12.09% year to date and 410% since its July 2016 IPO.
We do not currently have full research coverage on KGN.
Australia & New Zealand Market Movers
The Australian share market was higher yesterday (ASX 200 index +0.29%) led by positive performances from the banks. ANZ shares were up despite revelations at the royal commission on Monday that its financial advice was not in the interest of customers and that "high risk" advisers were instructing clients. Shares in childcare centre operator G8 Education continue to come under pressure as management downgraded earnings guidance once again. G8 are citing continued growth in industry supply for 2018 coming up against a drop in demand, and that given the prevailing market environment and impact on occupancy, it is clear that previous earnings targets are no longer achievable.
The New Zealand market was lower on Monday (NZX 50 index -0.24%) in light trading, with A2 Milk and Synlait Milk leading the index lower, while Pushpay Holdings and Fletcher Building gained. In other news, New Zealand Refining shares were higher after its annual meeting yesterday. CEO Sjoerd Post said the failure of the pipeline between the plant at Marsden Point and Auckland in September 2017 had a net impact on profit of $8.2m. At the end of February, the company declared a 66% increase in net profit for the year to Dec. 31 to $78.5m, driven by historically high average refining margins of US$8.02 per barrel of oil processed.
3 Things Markets Will be Watching this Week
1. Corporate earnings season in the US will gather pace this week with about one-third of the S&P 500's members scheduled to report in the next five days.
2. Investors will continue to watch fallout from the Hayne royal commission into the financial sector in Australia.
3. The latest Australian inflation data is published on Tuesday.
Have a Great Day,
Team