Global markets were mixed once again overnight, with Technology stocks falling while the broader US market was higher.
The S&P 500 and the Dow Jones indices rose, supported by gains in energy stocks and strong results from Berkshire Hathaway, while the Nasdaq was dragged down by a further drop in Apple shares.
As we touched on yesterday, this week the big event will be the US mid-term elections which take place on Wednesday (AU/NZ time). If the polls are correct, then President Trump and Republicans may lose control of the House of Representatives to the Democrats. Investors are likely exercising caution before this major event. It is also a busy week in terms of central bank announcements, with the US Fed, RBA, and RBNZ all making decisions this week.
Stock in Focus: Westpac (WBC:AX / WBC:NZ)
The major banks led the market gains on Monday after Westpac reported flat full-year cash earnings of $8.07 billion, in line with expectations.
Provisions for customer refunds and tough operating conditions including higher funding costs kept a lid on Westpac's profit growth, although their cost-out programme will have also provided the market some confidence. We saw the result as decent, given the difficult operating back-drop.
The Banking sector has a tough time of late, with sentiment extremely depressed with the fall-out from the Royal Commission into the sector in Australia. While the Banks appears cheap, we remain cautious on the sector as a whole, particularly given the growing risk of a property market correction, and as touched on last week ANZ remains our top pick among the major banks.
We are currently HOLD rated on Westpac.
Australia & New Zealand Market Movers
The Australian share market started the week off lower yesterday (ASX 200 index -0.53%) ending a streak that saw the market close in the black for six straight sessions. Healthcare stocks were the biggest drag on the index with CSL experiencing its first loss in seven sessions. Cochlear announced to the market on Monday it had lost a US patent infringement case and damages in the amount of $US268 million had been awarded against the company. The price of crude oil also continued to soften over the weekend, pushing the energy sector lower.
The New Zealand market sold off on Monday (NZX 50 index -0.64%) with local earnings insufficient to embolden investors wary about the outlook for the global economy. Z Energy again led the market lower. Z Energy extended its decline for a third day after the company attempted to clarify its dividend position for the remainder of the 2019 financial year. The country’s biggest fuel retailer rattled investors last Thursday with a -21% drop in first-half earnings and a dividend about five cents less than they were expecting.
3 Things Markets Will be Watching this Week
- US mid-term elections take place on Wednesday (AU/NZ time).
- The US Federal Reserve makes a policy statement on Friday (AU/NZ time).
- The Reserve Bank of Australia makes an interest rate decision on Tuesday, while the Reserve Bank of NZ makes a monetary policy announcement on Thursday.
Have a Great Day