Global markets were mixed overnight as the major US markets managed to make gains.
A jump in US 10-year bond yields boosted financial sector stocks (all else equal higher bond yields imply the banks can charge higher interest rates and improve their lending income). Investors are also waiting for earnings from marquee US corporations such as Amazon and Facebook this week, which will also help to assess the impact of an escalating US-China trade row and strength of the US economy.
Locally, both the ASX & NZX sold off by close to -1% yesterday as Trump's trade comments put investors on the defensive with market losses being broad based. For both Australia and NZ trade with China is important, so ongoing trade tariffs and/or weakness in the Chinese economy will likely have an impact on local markets.
Stock in Focus: Johnson & Johnson (JNJ:NYSE)
Among the US heavyweights to have reported earnings so far is Johnson & Johnson (JNJ). JNJ shares were up slightly after releasing their 2018 second quarter result which beat market expectations marginally and achieved solid year on year growth.
Looking at some of the detail, JNJ reported sales of $20.83 billion for the quarter, an increase of 10.6% compared to the second quarter of 2017, driven by favourable currency exchange and strong growth in the Pharmaceutical sector, particularly oncology medication.
We currently have a BUY rating on JNJ as a defensive portfolio holding.
Members should look out for a full update on JNJ to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market started the week with the biggest one day decline since March (ASX 200 index -0.93%) as investors sought more defensive positions after US President Donald Trump threatened to escalate the tariff war with China. The market heavyweights traded lower in response with BHP Billiton leading the market losses and the 4 major Banks were all lower. Woodside Petroleum shares were higher following a jump in the price of oil. In stock news, Nufarm shares fell sharply after it cut its 2018 earnings guidance, saying that extremely dry weather conditions had meant farmers cut back spending on herbicides and other products offered by the agricultural chemical company.
The New Zealand market sold off on Monday (NZX 50 index -0.93%) on what were light volumes, as growth stocks A2 Milk and Pushpay led losses while Kathmandu bucked the trend and made gains. Corporate news flow remains scarce ahead of local earnings season as companies enter black-out periods where they do not provide updates. Warehouse shares were unchanged as it said it will cut between 120 and 140 full-time jobs across its flagship 'red shed' stores in a restructure.
3 Things Markets Will be Watching this Week
1. US corporate earnings season continues as investors digest quarterly company profit announcements.
2. Trade anxiety is likely to remain with Trump now threatening to impose tariffs on all $US500 billion of imported goods from China.
3. Key economic news flow includes – Australian inflation numbers out on Wednesday and US GDP data published at the end of the week.
Have a Great Day,
Team