Global markets were mixed overnight as Wall Street was slightly lower while the German market index (DAX) reached an all-time high.
In the US we have begun the quarterly earnings season, with major US banks JP Morgan and Citi first to report quarterly profits overnight. During earnings season investor attention usually shifts back towards company profitability.
With the S&P 500 (US market index) up about 14% in 2017, investors are betting on strong earnings growth to sustain valuation levels. This makes the current earnings season as important as ever (especially against the backdrop of rising interest rates which will not be supportive for valuations) and we will be watching developments closely.
Stock in Focus: Bank of Queensland (BOQ:ASX)
Bank of Queensland climbed to a one year high yesterday after the Queensland focussed lender declared a special dividend of 8¢ per share and reported annual cash earnings of $378 million for the year ended August 31, beating the consensus forecast of $361 million.
The surprise special dividend came on the back of stronger second half lending growth. CFO Anthony Rose said on Thursday that BoQ's improving mortgage broker volumes helped drive home loan lending up 2% in the second half despite competition for principal and interest loans and a changing regulatory landscape. BOQ experienced a 2% increase in ordinary earnings per share and there was no change in ordinary dividends.
We are currently HOLD rated on Bank of Queensland.
Members should look out for a full update on BOQ to be released in our next weekly report.
Australia & New Zealand Market Movers
The Australian share market continued its upward trend on Thursday (ASX 200 index +0.39%) as the ASX 200 index hit a 3½ month high. The rally was broad based although the miners had a bad day as Chinese iron ore futures slid to their weakest level in more than three months. In stock moves, Bellamy's shares jumped 4.6%, moving higher for the fourth straight day after the infant formula brand upgraded its full-year guidance.
The New Zealand market was higher for another day yesterday (NZX 50 index +0.29%) as overseas investors continue to chase export-orientated growth stocks, with Synlait Milk and Xero extending gains while taking booking profits from Fisher & Paykel Healthcare's recent rally. In other news, Scott Technology advanced as the company boosted annual profit 26% to $10.3 million as the growing demand for productivity gains through automation and robotics stoked demand for the manufacturer's industrial systems.
3 Things Markets Will be Watching this Week
1. The NZ political situation and negotiations as a coalition government is formed now that all the special votes have been counted.
2. While markets have largely brushed off the geopolitical situation with North Korea, risks remain.
3. Minutes from the last US Federal Reserve Meeting are released on Thursday.
Have a Great Day,
Team