ASX & NZX Jump in Oct | PGG Wrightson Dips

1 November 2017

Global markets were higher overnight as more strong US corporate results, and tech shares, bolstered Wall Street. Earnings beats from Mondelez and Kellogg spurred the latest move higher for US equities. Apple, which rose to a fresh record high, continued to boost overall tech sentiment with generally positive iPhone X reviews.

Closer to home, both the Australian and NZ markets experienced strong gains in October, with the ASX 200 index and NZX 50 index up +4% and +2.7% respectively.

For the ASX, the market finally broke out of an extended sideways trading range with banks and miners pushing the benchmark top 200 index back towards 6000 points. The NZX has managed to rally to new highs, despite the surprise election result, with currency sensitive sectors performing well in recent times as the NZ dollar has trended lower. 

Stock in Focus: PGG Wrightson (PGW:NZ)

PGG Wrightson shares dipped yesterday as it said earnings growth will stall this year after a wet winter and spring and it will embark on a strategic review following the appointment of new chief executive Ian Glasson.

Management expect operating earnings for the coming year to be in line with the $64.5 million reported for the year ended June 30, while net profit will fall about 30% (mainly reflecting one-time gains from property sales in 2017 that won't be repeated in the current financial year). We note that PGW management have typically taken a conservative approach in providing early guidance. 

While the announcement was negative, risks such as adverse weather are unavoidable in the agricultural sector. In saying that, weather effects most likely only have a shorter-term impact on PGW’s profitability, and the long-term PGW investment case remains very much intact, in our view.

We are currently BUY rated on PGW.
Members and should look out for a full update on PGW to be released in our weekly report.

Australia & New Zealand Market Movers

The Australian share market retraced on Tuesday (ASX 200 index -0.17%) as a lacklustre day of trading capped a solid month of gains. In stock specific news, investors cheered a sales update from Woolworths, sending the stock 2.3% higher over the session, while Bendigo & Adelaide Bank shares dropped 4.8% after the regional lender downgraded its earnings outlook.

The New Zealand market was more or less flat yesterday (NZX 50 index +0.03%) led by a revival in Ryman Healthcare while Sky Network Television and NZX dropped. Ryman shares had fallen as low as $8.85 a week ago amidst investor concern about the impact the new government's policies could have on house prices.

 

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.                 The US Federal Reserve has a meeting this week and Donald Trump is expected to make a decision as to who is the next Fed Chair.

3.                 Monthly US employment data is released at the end of the week.  

Have a Great Day,

Team

Global markets were higher overnight as more strong US corporate results, and tech shares, bolstered Wall Street. Earnings beats from Mondelez and Kellogg spurred the latest move higher for US equities. Apple, which rose to a fresh record high, continued

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