Global markets were mostly high overnight, as Wall Street gains were checked by a drop in Facebook as well as Boeing.
Investors mostly though seem cautious ahead of what US policymakers might say about the outlook for US rates after they meet this week. As we touched on yesterday, lower interest rates have been a driving factor of the strong equity market returns this year and Thursday’s Fed announcement will be closely watched.
Theresa May's plan to hold a third vote on her Brexit plan was dealt a blow by the speaker of the UK parliament overnight who said she couldn't put it forward unless there was a substantive change in it.
Stock in Focus: Metro Performance Glass (MPG:NZX / MPP:ASX)
There was no relief for glass products maker Metro Performance Glass yesterday which cut its profit guidance once again and now expects annual operating profit will be about 12% lower than the last time it downgraded in November.
MPG cited poor performance from its Australian division. A slowing housing market across both side of the Tasman has weighed on the building and construction sector of late, as several major players (including Fletcher Building) have pointed to tougher Australian conditions as a headwind. MPG will be writing off $7-10 million from its intangible assets to recognise the poor Australian performance. “Australian Glass Group has had a transformative but very disappointing year overall” chief executive Simon Mander said. In New Zealand, where Metroglass claims 55% market share, Mander says the company has achieved sustained improvements in customer service and operational performance and the results are in line with expectations with gross profit margins improving.
This was clearly another disappointing update, although operationally MPG is still profitable, expecting operating earnings to now be around $25m – with its full year results being announced on 23rd of May. A tough operating environment in Aussie is not “new news”, and we still believe the MPG share price currently reflects a lot of negativity and it would not take much of an improvement to see a turnaround.
We currently have a BUY (High-Risk) rating on MPG.
Australia & New Zealand Market Movers
The Australian share market started the week off with gains (ASX 200 index +0.25%) despite dipping into the red twice through the middle of the day as the market extended volatility from last week. The major miners led the market gains on Monday as iron ore futures pointed higher and gold threatened to reach the $US1,300 level. The financial sector was a drag on the market on Monday. Major insurers Suncorp Group and Insurance Australia Group closed the session lower. Neither company has issued any statement to shareholders regarding severe storms in Sydney last week which caused extensive damage and flooding.
The New Zealand market rallied on Monday (NZX 50 index +044%) as the NZX rose to a fresh record high in quiet trading as investors digested the latest round of index re-weightings and wait on upcoming earnings. Kathmandu Holdings led the market higher – Briscoes Group managing director Rod Duke last week reiterated his interest in taking full control of Kathmandu.
3 Things Markets Will be Watching this Week
- The US Federal Reserve makes an interest rate decision Thursday morning AU/NZ time.
- Thursday also sees the release of official NZ economic growth (GDP) figures.
- Tuesday sees the release of minutes from the Reserve Bank of Australia’s last meeting, as well as Aussie house price data which is expected to confirm a suspected slowdown.
Have a Great Day,