Global markets were generally higher overnight, although the US Tech sector lagged the broader market.
Gains were led by financial and industrial stocks as marquee companies such as banking giant Morgan Stanley posted strong results and bolstered expectations of a solid second quarter. Once again, another strong round of US profit announcements is a key reason to remain bullish on markets and we are watching developments closely
Federal Reserve Chairman Jerome Powell's official line on US trade policy is one of respect to the Trump administration, acknowledging it is outside the Fed's responsibility and that it might all turn out for the best. Overnight however Powell touched on the fact that rising protectionism is creating uncertainty for the economy.
Stock in Focus: Z Energy (ZEL:NZ / ZEL:AX)
The weakest stock on the NZ market yesterday was Z Energy as the country’s biggest fuel retailer cut full-year earnings guidance by $30 million due to an extended shutdown at the Marsden Point oil refinery and high crude prices in the June quarter.
Z Energy is now forecasting operating earnings of $420 million to $455 million for the year through March 2019, down from previous guidance of $450 million to $485 million. The margins that Z is making from fuel continue to dominate headlines, as the government looks more closely at pricing strategy in the fuel sector. This recent downgrade may in fact ironically aid Z Energy in its pricing arguments.
In saying that, this was clearly a disappointing update from Z Energy, and thinking longer term we also believe there is a huge uncertainty around the company imposed by the potential proliferation of electric vehicles.
We currently have a HOLD rating on Z Energy.
Members should look out for a full update on Z Energy to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market rallied on Wednesday (ASX 200 index +0.67%) after global miner BHP reported record iron ore output for 2017/18, which sent its shares up over 3% in a boost to peers and overall sentiment. BHP's iron ore production rose 3% in the fourth quarter ended June 30 as productivity improved, cementing a record annual output as it set a bigger target for the current year. The market appears to have been impressed with the update and how BHP met or exceeded full year production guidance for petroleum, copper, iron ore, and energy coal. It also met revised guidance for metallurgical coal.
The New Zealand market was lower yesterday (NZX 50 index -0.37%) led by Z Energy following an earnings downgrade, with Ryman Healthcare and NZX also declining. Shares in Chorus made gains. The NZ market continues to underperform the Australian and Asian markets this week.
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