Global markets continued to move higher overnight with the US market (measured by the S&P 500 index) back at a 4-month high.
As we touched on yesterday, investors appear to have shrugged off trade war concerns for now and are looking ahead to US quarterly earnings season which kicks off at the end of the week. During earnings season the focus of investors generally shifts away from other issues and back towards quarterly company profit announcements and the market is expecting another strong round of corporate results.
Stock in Focus: Summerset (SUM:NZ / SNZ:AX)
Shares in retirement village Summerset (SUM) were a touch higher yesterday as it released a solid guidance update.
SUM said earnings for the 1st half of 2018 rose as between 21% to 26% as stronger development margins made up for a lower volume of new sales. Underlying profit, which excludes unrealised valuation gains in the fair value of investment property, was between $43 million and $45 million in the six months ended June 30 from about $36 million a year earlier. SUM will release its detailed results for the first half on August 14.
As a retirement village operator SUM benefits from the major tailwind of an ageing population. Strong property price inflation has also contributed to what have been exceptional levels of growth in recent times. We expect demand for retirement villages to remain strong, although a weaker property market will likely mean profit growth will slow to some extent.
We currently have a HOLD recommendation on Summerset.
Members should look out for a full update on Summerset to be released in today’s weekly report.
Australia & New Zealand Market Movers
The Australian share market broke its recent winning streak on Tuesday (ASX 200 index -0.44%) despite an overnight advance in base metals prices helping lift the shares of heavyweight miners. Brent crude prices continued to advance which also strengthened the energy sector. Macquarie announced late on Monday that it would lift its variable mortgage rates, putting pressure on the big four banks and Macquarie itself. Shares in data centre company NextDC fell after a major broker downgraded its recommendation on the stock.
The New Zealand market dropped once again yesterday (NZX 50 index -0.43%) led lower by Trustpower and New Zealand Refining, while Sky Network Television rebounded from the previous days fall. Trading volumes were low as market news flow remained relatively quiet. Shares in ERoad fell nearly -7% as it registered slower first-quarter growth than anticipated as prospective buyers put off their purchasing decisions across Australasia and in North America, after a period of rapid expansion in the US.
3 Things Markets Will be Watching this Week
1. Tit for tat tariffs, particularly as retaliatory measures between the US and China continue to sway investor sentiment.
2. A number of US Federal Reserve members make speeches late in the week.
3. Closely watched US inflation data is released at the end of the week.
Have a Great Day,
Team