Global markets rallied overnight as US stocks were higher after Federal Reserve Chairman Jerome Powell gave a robust view of the US economy and strong earnings from healthcare giant Johnson & Johnson reinforced expectations of a solid earnings season.
Federal Reserve chair Jerome Powell told legislators the central bank will continue to raise interest rates gradually with the world's biggest economy in good shape, comments which appear to have reassured investors.
As we discussed yesterday, another strong round of US profit announcements is a key reason to remain bullish on markets and we are watching developments closely. A number of US corporate heavyweights will be reporting over the next 2 weeks and of particular interest will be the US Tech giants which are trading at all-time highs and as such expectation are high, such as Netflix which we discuss below.
Stock in Focus: Netflix (NFLX:Nasdaq)
High flying technology market darling Netflix disappointed investors with its update, although recovered from an initial -15% sell off to end the day down -5%. It is worth keeping in mind that Netflix remains up an amazing +86% year to date.
Netflix's subscriber growth missed expectations as it “only” added 5.2 million users during the quarter, a million fewer users than it had forecast, while profits were in line with expectations. The market is divided as to whether the dip will prove to be nothing more than a buying opportunity, or whether this is a signal the that the dream run for the US Tech stocks may be coming to an end.
We currently have a BUY rating on Netflix.
Members should look out for a full update on Netflix to be released in today’s weekly report.
Australia & New Zealand Market Movers
The Australian share market sold off yesterday (ASX 200 index -0.61%) as a slide in the oil price hurt local energy stocks, after reports emerged Saudi Arabia could take its oil production to record high levels. While most of the resource sector was lower, Rio Tinto shares were higher as Rio’s solid production results for the second quarter showed that iron ore shipments had increased by 14%. The major banks traded higher but their gains did little to move the market.
The New Zealand market was slightly lower on Tuesday (NZX 50 index -0.16%) with Kathmandu Holdings and A2 Milk dragging the index lower while defensive stocks made gains amidst global uncertainty. In stock news, shares in New Zealand Refining were lower as it reported negative margins for the first time in five years after a major maintenance shut had to be extended last month. It reported gross margins for May and June of negative 71 US cents a barrel, in contrast to the US$6.82 a barrel achieved for March and April, with refining margins also a little softer than the market was expecting.
3 Things Markets Will be Watching this Week
1. US corporate earnings season means investors will be shifting their focus back to company profit announcements.
2. Trade will remain in the headlines after the United States announced further tariffs on an extra $US200 billion worth of Chinese goods.
3. Key economic news flow includes – Chinese economic data (GDP figures and retails sales) are published on Monday. Australian employment figures are released on Thursday
Have a Great Day,
Team