Global markets were in the red overnight, although the pace of selling eased on muted trading as Wall Street was closed for the funeral of former president George HW Bush.
US President Donald Trump fuelled market unease when he tweeted his willingness to impose new tariffs if a deal can't be reached – saying he is a “Tariff Man”. As we touched on yesterday, while there was no clear trigger for the sell-off, investor sentiment remains fickle to say the least.
Closer to home, Australian economic growth (GDP) data was weaker than expected. Third-quarter economic growth data showed the Australian economy grew by 2.8% in the year to September, a pull-back after what was a surprisingly strong annual lift to 3.4%. The news prompted renewed speculation that the Reserve Bank's next move will be to cut rates, and saw the Aussie dollar fall.
Stock in Focus: Scales Corp (SCL:NZX)
Scales Corp shares were slightly lower yesterday, following market moves, after the company raised its interim dividend payment and said annual earnings may beat expectations.
The board declared a fully imputed dividend of 9.5 cents per share, up from 9 cents a year earlier, and said operating earnings will slightly exceed current guidance of between $58-to-$65 million. Scales singled out a record apple export crop from its Mr Apple division and increased volumes in its food ingredients operations, although all divisions are trading ahead of the year-earlier period, it said.
We believe SCL offers an attractive risk reward opportunity to gain exposure to global agricultural trends, particularly as a growing middle class in Asia demands its produce.
We currently have a BUY recommendation on Scales.
Australia & New Zealand Market Movers
The Australian share market was lower on Wednesday (ASX 200 index -0.78%) as stocks were caught up in the sell-off across Asia. In stock news, Lynas Corp shares went into free-fall after the Malaysian government ordered the company to remove 450,000 tonnes of radioactive waste from Malaysia as a pre-condition for future licences to operate. The government's response surprised the company after a review found Lynas had generally complied with local regulations. We have highlighted regulatory risk is a key factor to consider when investing in Lynas.
The New Zealand market sold off yesterday (NZX 50 index -0.95%) following global market leads. Growth stocks and exporters such as Gentrack Group and Fisher & Paykel Healthcare were hit the hardest. Utilities software developer Gentrack, which has extensive operations in the UK and Europe, led the market lower, continuing its weakness since acknowledging concerns about its growth outlook. Trade Me after receiving a second and more attractive indicative offer from a global private equity firm. Hellman & Friedman is offering $6.45 a share, compared to Apax Partners' $6.40 bid.
3 Things Markets Will be Watching this Week
- Several US Fed members make speeches this week, with Chair Jerome Powell set to make another speech on Friday.
- The Reserve Bank of Australia makes an interest rate decision on Tuesday.
- There is an OPEC meeting later in the week, which will be interesting given the recent drop in the oil price.
Have a Great Day,