Global markets were higher overnight, as shares on Wall Street rallied on hopes that some degree of a trade deal is within reach between the US and China and as investors awaited earnings from some of the world’s biggest companies. Both the US and China are now focused on drafting a trade deal that could be signed by the APEC meeting in mid-November, and in that regard no news remains good news.
While it is still early, so far company earnings announcements overseas have generally beaten a low bar. Some of the higher profile results will come from Caterpillar, Microsoft, 3M, Amazon and Visa this week. During corporate earnings season investor attention usually shifts away from broader issues and back to corporate profitability.
Stock in Focus: Tourism Holdings (THL:NZX)
Tourism Holdings led the local market lower yesterday, as the rental RV operator said aaverage US vehicle sales margins are down 40% in the 1st quarter of the 2020 financial year. We would note that peak season for the US business is not until the Northern Hemisphere Spring (May, June), but clearly things are off to a slow start. THL management are reducing their US vehicle fleet but they are still exposed to short term shifts in the market.
THL do have geographic and operational diversity, and outside the US THL continues to trade as previously indicated. We remain positive on valuation grounds with the company offering a 6%+ dividend yield.
We currently have a BUY rating on THL.
Members should look out for a full update on THL to be released in our weekly report
Australia & New Zealand Market Movers
The Australian market was slightly higher on Monday (ASX 200 Index +0.04%) as shares in Australia's fast-charging technology companies were savaged on Monday as short-seller reports, regulatory risks and investors jittery about frothy valuations. WiseTech, Afterpay Touch, Altium, Appen and Xero all ended the session in the red, with logistics software provider WiseTech slammed after research firm J Capital backed up last week's criticism by raising more concerns about its core software platform, saying the product was expensive and offered inferior service to customers. Wistech shares re-entered a trading halt.
Meanwhile, Treasury Wine Estates fell on the news that its chief executive Michael Clarke would retire in the 2021 financial year.
The New Zealand market was a touch lower yesterday (NZX 50 Index -0.04%) as global investors were unnerved by the uncertainty over the Brexit outcome and a slowing pace of growth in China, with Merdian Energy reporting the biggest. Vector dipped after it reported a 1.5% increase in September-quarter electricity customer numbers from a year earlier and a 2.3% lift in gas customers.
3 Things Markets Will be Watching this Week
- US earnings season for the 3rd quarter continues this week, and so far company announcements have generally beaten a low bar. Some of the higher profile results will come from Caterpillar, Microsoft, 3M, Amazon and Visa.
- The European Central Bank (ECB) meets this week, although no policy changes are expected given the range of initiatives that were announced in September.
- A number of AGM's and trading update from Australasian companies including Auckland Airport, Metlifecare, ResMed, and Qantas.
Have a Great Day,