Global markets were lower overnight as the US market sold off sharply on renewed uncertainty regarding the US stance on Chinese investments in American technology companies. Comments from Larry Kudlow re-established the White House's hard line on trade even after President Donald Trump softened his stance.
While stock markets are feeling the effect of trade tensions, particularly the Chinese stock market, our local currencies are also coming under pressure with the Aussie and Kiwi falling to multi-year lows versus the US dollar.
The Australian dollar has dropped towards the 73 cent mark, while the NZ dollar has fallen below 68 cents versus the US dollar. Part of the recent pressure has been attributed to trade concerns which are seen as potentially hitting the Chinese economy harder than the US. Given China is a key trading partner of Australia and NZ our currencies have come under selling pressure.
Stock in Focus: Select Harvests (SHV:AX)
One stock which will gain from strength in the US dollar is almond producer Select Harvests (SHV).
SHV shares have been on a solid run this year as fortunes have turned around for the almond producer with strengthening almond prices. In its most recent update SHV said its 2018 crop harvest will be solid (at the top end of guidance at around 15,000MT) with quality and sizing is consistent with expectations, despite some issues with frost in its NSW orchards. We see SHV as a beneficiary of the trend towards health-conscious consumers and a strengthening US dollar.
We currently have a BUY (High-Risk) rating on SHV.
Members should look out for a full update on SHV to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market was essentially flat yesterday (ASX 200 index -0.02%) following a whipsaw day of trading that pushed the index between positive and negative territory. Overnight strength in oil prices supported energy stocks such as Woodside Petroleum. A big decline in US oil stocks, production losses in Canada, uncertainty over Libyan exports and the US warning to allied nations to cut Iranian oil imports to zero by November combined to propel oil prices higher. In other news, Metcash shares continued to come under pressure after the supermarket operator unveiled a $149.5 million loss after tax on Monday.
The New Zealand market made small gains in light trading (NZX 50 index +0.07%) led higher by Pushpay and Air New Zealand while electricity company’s Genesis Energy and Mercury fell. In stock news, Air NZ shares were higher despite Australia's Federal Court ordering it to pay A$15 million for its role in a global air cargo cartel through the middle of last decade. In other news, the Serious Fraud Office is now investigating CBL Insurance and associated entities, adding to investigations by the Reserve Bank and Financial Markets Authority.
3 Things Markets Will be Watching this Week
1. Investors will continue to watch for retaliatory trade tariff measures between the US and China.
2. The Reserve Bank of New Zealand makes an interest rate decision on Thursday morning.
3. US economic growth (GDP) and inflation data is published at the end of the week
Have a Great Day,
Team
