Global markets added to gains overnight as the Dow Jones, (US Mega Cap Market Index) hit a new record high, bolstered by a rally in shares of IBM after the company reported quarterly earnings and an outlook that exceeded expectations.
Once again, the high level of the market makes the current US earnings season as important as ever in terms of supporting company share price valuations. While it is early days, so far markets look to be holding near all-time highs.
While the ASX & NZX markets experienced their 9th and 11th consecutive day of gains respectively, there were several stock specific news events of note which we touch on below.
Stock in Focus: Crown Resorts (CWN:AX)
Crown shares fell yesterday on allegations that among other things staff members tampered with casino equipment for the company’s benefit.
Independent MP Andrew Wilkie, using parliamentary privilege, said three of its former employees had made serious allegations against the company including slot machine tampering and avoiding money-laundering scrutiny. Crown have said that they reject the allegations, and we are watching developments closely.
While the share price dropped yesterday, it was not as severe as last year when Crown also hit headlines for the wrong reasons following the detention of its employees in China. We believe the worst-case scenario for Crown will likely involve fines & penalty’s, although this is unlikely to have a material impact on the company’s overall value.
We are currently BUY rated on CWN.
Members should lookout for our full update on CWN to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market was marginally higher yesterday (ASX 200 index +0.02%) as it managed to extend a nine-session rally as the ASX 200 index approaches six-month highs.
On the individual company level, mining heavyweight Rio Tinto fell following news that two former executives have been charged with fraud by the SEC. BHP shares also slipped after the mining giant released mixed production figures. Pharma giant CSL rose after news it had averted a second strike against its remuneration report and as the company reaffirmed profit guidance.
The New Zealand market was more or less flat on Wednesday (NZX 50 index +0.04%) as interest from international investors supported the market, with Synlait Milk and Comvita advancing while Sky Network Television gave up gains. Synlait has gained 145% this year, tracking A2 Milk, the marketer which it supplies, which has seen rapid sales growth. Comvita raised its 2018 earnings outlook after a solid recovery of the so-called "grey channel" into China and significant North American sales, chief executive Scott Coulter said in a presentation at the annual meeting.
3 Things Markets Will be Watching this Week
1. Quarterly US corporate profit announcements, with the level of the market making the current earnings season as important as ever.
2. Australian employment data is published on Thursday.
3. Minutes from the last Reserve Bank of Australia meeting are released on Tuesday.
Have a Great Day,
Team