Global markets sold-off once again overnight, although the US market recovered from heavy early losses in a volatile session to end down about -0.5%.
The punishing month for US stocks continues, as a dismal outlook from industrial bellwethers Caterpillar and 3M sparked concerns over corporate growth and added to worries ranging from China’s slowdown to Saudi Arabia’s diplomatic isolation. As we touched on yesterday, markets generally shift their attention back to company fundamentals during reporting season and investors are seeking ever greater reassurance from quarterly reports on the outlook for corporate profits.
Stocks across Asia were also weaker – with the NZ Market now at 4-month low, and the ASX 200 index now trading well below the 6,000 index level and at a 6-month low.
Stock in Focus: Healthscope (HSO:AX)
Shares in private hospitals company Healthscope were among the few winners yesterday, jumping +19%. Private equity firm BGH Capital and Australian-Super have returned with another $4.11 billion bid for Healthscope, five months after the private hospital operator rejected their takeover attempt. The $2.36 a share offer, is at a 32.6% premium to Healthscope's Monday closing price.
It will be interesting to see how the takeover plays out this time around, as HSO’s board previously decided to reject two takeover offers as they believed the offers undervalued HSO.
HSO is facing challenges with increased market share from public health sector and a lower participation rate for private health insurance. However, our positive medium-term outlook remains, with optimism the market will improve and the aging demographic offsets current challenges in the market over the medium term. We also believe he hospital expansion projects will deliver long-term value.
Australia & New Zealand Market Movers
The Australian share market closed lower again yesterday (ASX 200 index -1.05%) with energy and materials stocks dragging the ASX back toward last week's six-month low. Energy stocks were among the worst performing on the market after the government announced a default tariff for household electricity that would act as a cap on prices. Big and small suppliers voiced concerns over the new measure and investors headed for the exits across the sector.
The New Zealand market sold off on Tuesday (NZX 50 index -1.47%) hitting a 4-month low. Fisher & Paykel Healthcare was among the hardest hit after the breathing mask maker lost the latest round in a wide-ranging patent dispute. In Germany, the Munich Regional Court upheld a patent claim by rival ResMed in a two-year dispute. The breathing apparatus makers have lodged suits and countersuits across multiple jurisdictions, which has been an ongoing and unavoidable distraction for the business. The result is interesting, as FPH has to date won the majority of the legal battles
3 Things Markets Will be Watching this Week
- US corporate earnings season for the 3rd quarter gets into full-swing with reports from Microsoft, Amazon and Alphabet due this week.
- Trade related news-flow is likely to continue to feature in headlines.
- The European Central Bank (ECB) makes an interest rate decision on Thursday & US GDP data is published at the end of the week.
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