Global markets rallied overnight as investors speculated the global economy can withstand the impact from the still-spreading coronavirus after China’s market sell-off eased. Tesla extended its amazing run, while Alphabet (Google) slumped after delivering weak earnings.
Investors appear to be taking some comfort from the measures Beijing has taken to contain the virus and to support economic growth. Still, travel restrictions continue and business shut-downs mount, with Macau closing casinos for another two weeks. With the extent of the Coronavirus impact unknown we think the market is going to remain volatile/nervous.
The Reserve Bank of Australia held the official cash rate steady at 0.75% at its first meeting of the year yesterday. The result was widely expected by the market, but the central bank's commentary was unexpectedly positive as it expects economic growth to pick up to around 2.75% this year.
Stock in Focus: Briscoes (BGP:NZX)
Shares in Briscoes were higher aftrer releasing mixed sales momentum from BGP’s 4th quarter sales.
Group sales were up +1.8% although declined 0.3% on a same store basis driven by negative Homeware sales growth of 2.0%. In contrast, Rebel same store sales increased 2.7%.
Management reiterated previous commentary on the competitive retail environment and associated pressure on gross margins. Briscoes will release full year earnings in mid-March.
Members should look out for a full update on BGP to be released in our weekly report.
We currently have a HOLD rating on BGP
Australia & New Zealand Market Movers
The Australian market was higher on Tuesday (ASX 200 Index +0.37%) with volatility dominating as investors balance emerging news of the coronavirus outbreak while forming a view of the outlook beyond the hysteria.
Trade in oil in particular is feeling the pinch. The S&P/ASX 200 Energy Index, which includes all oil and gas companies in the broader benchmark, has now fallen 6% over the past month as the disruption from the coronavirus weighs on oil demand.
The New Zealand market continued to trend lower yesterday (-0.33%) led lower by export stocks as Coronavirus continued to propel investor decision making. Both Napier Port and Port of Tauranga were under heavy selling on reports that China was halting imports in some areas such as logging. In other news, wholemilk powder prices fell 6.2% at this morning’s dairy trade auction – the first since coronavirus impacts.
3 Things Markets Will be Watching this Week
- US earnings season continues this week.
- Coronavirus Headlines.
- The Reserve Bank of Australia makes a decision on Tuesday.
Have a Great Day,