Global markets were lower overnight with US stocks retracing after three sessions of gains, as lower Treasury yields weighed on financial stocks, offsetting a boost from Home Depot’s better-than-expected quarterly earnings. Weakness also stemmed from Trump who announced via tweet that he’s ‘not ready’ to make a deal with China and cited the need for a ‘big’ Fed rate cut.
Closer to home, Tuesday saw the IPO listing of Napier Port, with demand for the stock seeing it close the day up +13.5% to $2.95 a share. While the shares were listed at the top of the range (at $2.60), investor appetite was strong on day 1, particularly given the attractiveness/lack of supply of defensive infrastructure type investments on the NZ market at the moment.
It is a big day of earnings on the NZX today, with A2 Milk, Fletcher Building, and Spark set to report results.
Stock in Focus: Z Energy (ZEL:NZX / ZEL:ASX)
While the NZX rallied yesterday, shares in Z Energy lagged as the Commerce Commission released an anticipated draft report which suggests fuel retailers may be earning close to $400 million a year in excess returns, requiring changes to increase competition in wholesale fuel supply.
The Commission is now seeking feedback on a range of potential options – mostly aimed at increasing competition in the wholesale fuels market by removing restrictive provisions from term fuel contracts and encouraging more switching of supply. The Commission is seeking comments on its proposals by Sep13 and aims to submit final recommendations to the government by Dec 5.
Regulatory threats and risks are uncertainties around Z Energy that we have highlighted in the past which cloud the investment case. Despite an attractive looking dividend, these uncertainties, combined with potential longer-term headwinds form the rise in electric vehicles means we do not hold a positive view on Z Energy.
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 market added to gains on Tuesday (ASX 200 index +1.20%) as risk sentiment continues to improve after taking a significant hit in the previous week.
BHP Group was the main weight on the market for most of Tuesday after its $US9.4 billion underlying profit came in below most analysts' expectations. The mining giant announced it will pay a final dividend of US78¢, ensuring a record full-year dividend of $US2.35 per share. On the flipside, software company Altium saw its shares jump despite missing consensus forecasts for its full-year revenue and profits. Chief executive Aram Mirkazemi said the company was on track to exceed its 2020 target of $US200 million in revenue.
The New Zealand market rallied yesterday (NZX 50 index +0.95%) as index heavyweights A2 Milk and Meridian had a strong trading session. Mercury NZ was basically unchanged as the energy supplier posted an 11% drop in earnings, less than forecast. Outside the main index, shares in Comvita fell as the manuka honey-maker today deferred its annual results until later in the week, saying more time was needed to complete its audit with potential asset impairments required.
3 Things Markets Will be Watching this Week
- Australasian earnings season gathers momentum this week with a number of major companies set to make profit announcements.
- Minutes from the Reserve Bank of Australia's latest meeting are released Tuesday.
- Minutes from the last US Federal Reserve Meeting are also published on Tuesday.
Have a Great Day,