Global markets rallied overnight, as the major US markets surged with the Technology sector leading gains and reversing some of its previous losses. Upbeat earnings from blue-chips such as Johnson & Johnson and Goldman Sachs eased jitters over the impact of rising interest rates and tariffs on corporate profits.
As we touched on yesterday, it will be an interesting US earnings season, as generally during reporting periods investor focus shifts back towards company fundamentals rather broader macroeconomic issues. We will be watching developments closely.
Closer to home, the Australian market (ASX) is trading at a 6-month low and selling pressure, at least for the short term, appears to have reached exhaustion point with the market staging a tentative recovery yesterday. Several commentators are suggesting the market has become quite oversold.
Stock in Focus: Aristocrat (ALL:ASX)
One of best performers on ASX yesterday was gaming software company Aristocrat (ALL), which rebounded +4% on the back of a broker upgrade.
Like other growth stock names, ALL has been hit hard of late as investors take profits. In terms of recent news, ALL released what looks like a well-received investor update at the global gaming expo where it highlighted industry trends and the massive opportunity in online gaming. The company reports its results next month.
We have a positive medium-term view on ALL who have been disciplined in their focus on growth which is now underpinned by expanding their digital content, technology and distribution channels. We believe growth is likely to continue as the business transforms to more online gaming and given the massive market opportunity.
We currently have a BUY recommendation on Aristocrat.
Members should look out for a full update on Aristocrat to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market rebounded somewhat on Tuesday (ASX 200 index +0.59%) as the materials sector lifted the ASX from a six-month low led by BHP Billiton.
In stock news, shares in rare earths miner Lynas were slightly higher after the composition of the committee reviewing its Malaysian operations was announced. The panel will include six scientists and university academics and not politicians hostile to its operations as Lynas had originally feared. Telstra led the market losses after nearly two-thirds of shareholders voted against the telco's remuneration report at its annual general meeting on Tuesday.
The New Zealand market was lower yesterday (NZX 50 index -0.39%) with Meridian Energy lower as the power company confronts dry conditions, and exporters Comvita and Fisher & Paykel Healthcare faced a stronger kiwi dollar.
The NZ dollar was higher as stronger-than-expected inflation data reduced the chances of a rate cut by the Reserve Bank of New Zealand. In other stock news, Sky Network Television posted the biggest gain on the day, up +3.8% as the New Zealand Herald reported the pay-TV operator may be a potential takeover target by NBC Universal. The company holds its annual meeting on Thursday.
3 Things Markets Will be Watching this Week
1. US corporate earnings season for the 3rd quarter gets underway.
2. Trade related news-flow is likely to continue to feature in headlines.
3. Minutes from the last US Federal Reserve Meeting are released on Thursday morning AU/NZ time.
Have a Great Day