Global markets were lower overnight, but the US market recovered over the day from initial heavy losses to end the session only slightly lower. Stocks across Asia fell sharply after Trump stepped up pressure on China, saying in a tweet that he will hike tariffs on some Chinese goods at the end of the week as trade negotiations are tracking too slowly.
Beijing initially threatened to walk away from the negotiating table after US President Donald Trump said he would increase existing tariffs on Chinese goods and introduce a 25 per cent tariff on an additional $US325 billion worth of goods currently untaxed. The move caught Chinese officials off-guard, with reports Beijing was considering pulling out of negotiations scheduled for this week, but China later said a delegation was still preparing to go to the US.
Stock in Focus: Z Energy (ZEL:NZX / ZEL:ASX)
Z Energy shares were higher following its 2019 full year result as it surprisingly increased its dividend and signalled further increases in dividend payments to shareholders.
Z anticipate a more upbeat 2020 as it benefits from further cost savings from its 3.0 strategy, with its larger scale after adding Caltex to its fuel network. Due to a difficult start to 2019 with the extended outage at Marsden Point refinery and as record prices at the pump trimmed petrol volumes, net profit after tax (under replacement cost basis) was down -13% from last year to $178m, while better than expected cost savings and improved cost savings helped to mitigate the losses.
While the boost in dividend payment has been well received for ZEL providing some near-term optimism, we believe industry wide headwinds are likely to act against Z over the long-run.
We currently have a HOLD recommendation on Z Energy.
Members should look out for a full update on Z Energy to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market started the week in the red (ASX 200 index -0.82%) as trade tensions escalated between the US & China. Westpac led the declines on the local sharemarket after reporting its profits slumped 22 per cent in the first-half of the year, citing ongoing compensation costs and its decision to exit the personal financial advice market. China-focused stocks in particular were among the market's worst performers, such as Bellamy’s and Treasury Wine Estates. Gold miners were among the few stocks on the ASX that closed in the green on Monday.
The New Zealand market sold off on Monday (NZX 50 index -0.97%) following moves across Asia as US President Donald Trump's tough stance on trade spooked investors. Exporters including A2 Milk and Fisher & Paykel Healthcare were among those sold off. In stock news, Comvita sank 15 percent after saying it expects to post an annual loss of $6 million due to another poor honey harvest. Briscoe Group was also lower after warning rising costs and higher wages had more than offset its first-quarter sales growth. The retailer also said accounting changes would weigh on its bottom-line this year.
3 Things Markets Will be Watching this Week
- The US first-quarter reporting season gets into its final stages this week, with some Aussie & Kiwi stocks also reporting.
- The Reserve Bank of Australia makes an interest rate decision on Tuesday afternoon.
- The Reserve Bank of NZ make an interest rate announcement on Wednesday.
Have a Great Day,