Global markets were mixed overnight after the release of the Federal Open Market Committee’s minutes from its last policy meeting as the S&P 500 US market index marked its longest bull-market run.
As we touched on yesterday, a key factor to watch in terms of driving markets will be interest rates, particularly the pace of rate hikes in the US by the Federal Reserve. The Fed minutes released overnight showed the central bank intends to maintain a gradual pace for rate hikes with no real surprises.
Closer to home, it was a bumper day of earnings announcements yesterday across Australia/NZ with large moves in both directions. We have highlighted key announcements below, with full updates on stocks to be released in our weekly report.
Stock on Focus: A2 Milk (:NZ / A2M:AX)
After disappointing the high expectations of investors and the market in recent times, sharers in A2 Milk jumped +6% yesterday as the milk marketer more than doubled net profit to $195.7 million in the June 2018 year, as it widened margins and increased infant formula sales.
Revenue rose 68% percent to $922.7 million, just beating its $900 million-to-$920 million forecast from May. It was a solid result, and we see yesterday’s news as a sign that market expectations may have now been reset to realistic levels.
We currently have a HOLD recommendation on A2.
Members should look out for a full update on A2 to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market was lower yesterday (ASX 200 index -0.29%) as the Miners and Banks weighed on the market.
The standout was software as a service company Wisetech Global which surged +27% and lifted the tech sector. Wisetech reported a 44% jump in revenue to $221.6 million for the 2018 financial year, coming in ahead of its own guidance. The company also announced it was forecasting similar growth for 2019, further surprising investors.
Shares in TPG Telecom also surged as it announced it has entered into discussions with Vodafone regarding a merger, with Telstra also receiving a share price boost. Sydney Airport also released a solid result, with operating earnings up +8.1% and revenue rose 7.9% higher, mostly driven by higher sales in the company's expanding property business. Coca-Cola Amatil shares responded positively as the company reported a fall in underlying earnings which was still higher than market expectations, and said it has put its SPC fruit and tomato business up for sale
The New Zealand market hit a new record high on Wednesday (NZX 50 index +0.51%) amidst a slew of earnings, with Trade Me and A2 Milk Co gaining on their annual accounts while Fletcher Building dropped.
Trade Me said it is distributing $100 million via a 22 cents per share special dividend as it reported a string result. Fletcher Building was the worst performer on the index, as it reported a net loss of $190 million for the financial year. Operating earnings – excluding Building + Interiors – were $710 million, within the $680 million to $720 million range the company forecast. Spark shares were a touch lower as it posted a -7.9% decline in annual profit to $385 million as it booked restructuring costs on its efforts to become the lowest cost operator.
3 Things Markets Will be Watching this Week
1. Locally, investors in Australia and NZ will have a number of profit announcements to focus on as earnings season continues.
2. RBA Governor Lowe makes a speech on Tuesday, with minutes from the last Reserve Bank of Australia meeting released on the same day.
3. The annual Jackson Hole meeting of global central bankers kicks off on the weekend.
Have a Great Day,
Team