Busy Week – Fed, NZ GDP, Aussie Housing | ANZ Update

18 March 2019

Global markets were higher on Friday with US stocks led by technology companies, pushing the US S&P 500 market index to its best week this year.

The busy week ahead will be dominated by Brexit news, policy meetings at the US Federal Reserve and Bank of England and the state of US/China trade talks.
As we mentioned last week, the US Fed has indicted they are becoming more dovish when it comes to raising interest rates. Lower interest rates are supportive of the economy and business with a lower cost of borrowing, and also improve company valuations – and this has been a driving factor of the strong equity market returns this year. Thursday’s Fed announcement will be closely watched. 

Closer to home, 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.
 

Stock in Focus: ANZ Bank (ANZ:ASX / ANZ:NZX)

ANZ shares have recovered after a tough 2018, coming out relatively unscathed from the royal commission into the banking sector, as the market had anticipated the possibility of heavy regulatory costs and limitations being imposed on the banks.

ANZ  have recently released their 2019 first quarter lending update which was positively received, despite growing home lending by only +1% over the year versus the market at 4.2%. While it isn’t ideal to be growing below the market, ANZ are shifting away from the riskier investor market and focusing more towards owner occupiers – which is actually a higher quality segment of the market. 

Given the recent fall in house prices, particularly in Sydney and Melbourne, this approach may pay-off given a lower exposure to over-leveraged investors with interest only loans that are more prone to default risk in a falling market, as opposed to an owner occupier with a principal and interest loan. ANZ remains our preferred pick of the big 4 Aussie Banks.

We currently have a BUY rating on ANZ.

 

 
Australia & New Zealand Market Movers

The Australian share market was marginally lower on Friday (ASX 200 index -0.07%) ending a mixed week down after Brexit uncertainty and news-flow around trade negotiations saw the market struggle to find a clear direction.
 

The New Zealand market finished the week on a positive note Friday (NZX 50 index +0.40%) as index re-weightings heightened activity in a week that had already been punctuated by some large investors repositioning their portfolios. In stock news, Spark said it will take up an option to renew some radio spectrum rights in 2021 which are used for 3G and 4G mobile services, with the new 5G services set to be their game-changer technology. Fonterra continued to fall as it scaled back its forecast increase in milk collection, blaming the dry weather.

 

3 Things Markets Will be Watching this Week

  1. The US Federal Reserve makes an interest rate decision Thursday morning AU/NZ time.
  2. Thursday also sees the release of official NZ economic growth (GDP) figures.
  3. 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,
 

Team

The busy week ahead will be dominated by Brexit news, policy meetings at the US Federal Reserve and Bank of England and the state of US/China trade talks.

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