Global markets were higher overnight, with gains on Wall Street with Facebook, Apple and Amazon leading the way, as investors awaited a key Federal Reserve meeting that is expected to lay the groundwork for an interest rate cut later this year.
It is a busy week for global central banks this week, with the Bank of Japan also meeting and widely expected to reinforce its commitment to retain a massive stimulus program for some time to come, while the European Central Bank meets in Portugal after inflation expectations in the euro zone plunged.
Stock in Focus: Air New Zealand (AIR:NZX / AIZ:ASX)
Air New Zealand (AIR) shares have slipped further after downgrading its 2019 annual operating earnings to exceed $340 million. This is Down from previous earnings guidance of between $340m to $400m, due to jet fuel prices remaining more expensive than initially anticipated, and slightly weaker demand (which was already accounted for).
Air NZ will defer capital expenditure and implement significant cost cutting to help weather slowing demand and rising fuel prices – in order to maintain a strong balance and maintain a stable dividend pay-out.
Air NZ also announced a multi-billion dollar investment for eight (and up to 20) new Boeing planes with investment and delivery to commence from 2022 through to 2027. The newer aircrafts will be larger and 25% more fuel efficient than the aircrafts they are replacing with the average annual capital spend over the period being less than half of what was spent over the previous five years.
We currently have a BUY (high Risk) recommendation on Air NZ.
Members should look out for a full update on Air NZ to be released in tomorrow's weekly report.
Australia & New Zealand Market Movers
The Australian share market was in negative territory on Monday (ASX 200 index +0.18%) weighed down by losses in the miners, amid some lingering concerns about the health of China's economy.
AGL shares climbed after it told investors that it has ceased carrying out due diligence on telecommunications group Vocus only six days after announcing a $3.3 billion bid. AGL made its offer one week after Swedish private equity firm EQT walked away from its own due diligence. Vocus shares plunged 25% as It reiterated its full-year guidance for operating earnings of between $350 million and $370 million. Afterpay Touch extended their slide after the buy-now, pay-later provider was ordered on Friday by the financial intelligence agency to appoint an external auditor to scrutinise its compliance with anti-money-laundering laws.
The New Zealand market started the week down (NZX 50 index -0.64%) in relatively quiet trading, weighed down by blue-chip stocks such as Auckland International Airport and Meridian Energy which have been trading near records. The New Zealand arm of ANZ Bank said chief executive David Hisco's temporary sick leave will now be permanent after an internal review raised concerns over his personal expenses.
3 Things Markets Will be Watching this Week
- Trade War headlines are likely to remain drivers of investor sentiment.
- On Tuesday, the Reserve Bank of Australia will release the minutes of its last meeting, when it cut interest rates.
- The key event to watch for the week will be the latest US Federal Reserve policy meeting with an announcement set for Thursday morning AU/NZ time.
Have a Great Day,