Global markets were higher overnight, with shares on Wall Street rebounding as Technology stocks surged higher.
In an event light week, investor attention is likely to remain focussed on economic data as investors look for indications as to the health of the global economy. As we touched on yesterday, there have been renewed concerns sparked by a sharp fall in China’s exports and after the European Central Bank became the latest central bank to voice concerns about growth. This was compounded by weak monthly US jobs numbers last week, and it remains to be seen whether the US economy may be running out of steam.
Stock in Focus: Woolworths (WOW:ASX)
Shares in retail giant Woolworths (WOW) fell after their 2019 first half result in February failed to meet managements ambitious targets. While recent efforts to improve the business are commendable, the outlook for WOW remains challenging, in our view.
Group sales from continuing operations for the half were up +2.3% from last year to $30.6 billion, driven by their largest business division, Australian food. Australian food and Big W experienced modest improvements, but were limited by tough trading conditions with increased competitor activity, as well as poor weather which also severely impacting earnings for its Endeavour drinks business.
While WOW is currently doing well, delivering some earnings growth in a challenging industry, we think it is only a matter of time as competition intensifies and we begin to see weaker margins and earnings fall. Not only that, we are more sceptical than WOW who are adamant on a recovery of their Big W businesses, which is finding it difficult to pull a profit against the likes of K mart and Target.
We currently have SELL rating on WOW.
Australia & New Zealand Market Movers
The Australian share market continued to pull-back yesterday (ASX 200 index -0.38%) as investors digested Friday's economic figures from the US and China, and moved toward more defensive sectors. Energy stocks weighed the market on Monday as the price of oil slid in reaction to concerns over global growth. Gold mining giant Newcrest led the market on Monday after announcing it will pay $US806.5 ($1.15 billion) for a controlling stake in the Red Chris copper-gold mine and surrounding tenements in British Columbia. The deal marks the local miner's first entry into North America.
The New Zealand market sold off yesterday (NZX 50 index -0.52%) following global moves. Sky TV led the market lower, hitting a new all-time low on large volumes, with the pay-TV operator down 45 percent over the past 12-months as the company has struggled to articulate a strategy to address its shrinking subscriber base. Trade Me shares were unchanged as the online marketplace's private equity suitor secured Overseas Investment Office approval for its takeover, leaving shareholder approval next month as the last substantial hurdle.
3 Things Markets Will be Watching this Week
- Important US consumer inflation figures are published on Wednesday.
- US Federal Reserve Chairman Powell makes a speech on Tuesday.
- China will release retail sales, industrial production and fixed-asset investment reports on Thursday.
Have a Great Day,