Global markets stabilised overnight, with shares on Wall Street rallying on a strong set of earnings from retailers and as bank stocks rebounded after the Turkish lira snapped a three-week slide.
Turkey is an issue given its potential threat to the European banking system, as well as an escalating global war. Overnight fears that Turkey's economic problems would spill over to the rest of the global financial markets eased which saw a recovery in risk assets. European shares steadied after a two-day selloff as concerns about contagion from Turkey's currency crisis eased and reports showed the EU's largest economy, Germany, is picking up more steam than expected in the second quarter.
Corporate earnings season is now fully underway across Australia and NZ, with major stock moves being driven by company profit announcements.
Stock on Focus: Summerset (SUM:NZ / SNZ:AX)
Summerset was the first major retirement village operator and developer to report earnings yesterday, as it lifted underlying earnings 27% and declared an increased dividend, which was largely in line with recent guidance.
At the bottom line, net profit fell -9% as the slowing housing market produced smaller property revaluation gains. This is interesting given our comments yesterday around a slowing property market, which could potentially hit development margins for the retirement village sector going forward.
Summerset has been the second best performing stock (behind Synlait Milk) on the NZX 50 this year with a +40% gain, and while we are positive on the retirement sector, we believe Summerset is more or less fairly priced at the current juncture.
We currently have a HOLD recommendation on Summerset
Members should look out for a full update on Summerset to be released in next week’s weekly report.
Australia & New Zealand Market Movers
The Australian share market rebounded on Tuesday (ASX 200 index +0.76%) pulled higher by gains for banks and miners as fears that Turkey's economic problems would spill over to the rest of the global financial markets eased. Some Australian companies were heavily sold down after reporting earnings on Tuesday, with Cochlear, Challenger, and Domino's Pizza dropping after investors weighed up their results. On the flipside, National Australia Bank climbed after it flagged additional provisions while announcing unaudited cash earnings of $1.65 billion for the third quarter, down -3% on the prior quarter, but ahead of the market expectations.
The New Zealand market was in positive territory yesterday (NZX 50 index +0.30%) as shares bounced back from the prior day’s sell-off led higher by Synlait Milk and A2 Milk. Spark shares were slightly higher as it said it secured broadcasting rights to the English Premier League and Manchester United TV. PGG Wrightson shares were unchanged after reporting a record profit, which was more or less in line with recent guidance.
3 Things Markets Will be Watching this Week
1. US corporate earnings season moves into its latter stages.
2. Locally, investors in Australia and NZ will have a number of profit announcements to focus on as earnings season gets into full-swing.
3. Geopolitics, with the Turkey economic situation hitting headlines over the weekend.
Have a Great Day,
Team