Global markets were higher overnight as investors turned their focus to earnings. Technology and Healthcare shares led the way as investors appeared less concerned about possible retaliation for the American-led missile attack in Syria. As we touched on yesterday, the latest round of US corporate results will be key to supporting equity markets.
Expectations are high, with the strongest earnings season in seven years forecast given the underlying strength of the US economy combined with a big boost from the recent US tax reforms. While geopolitical and other concerns remain in the background, we see earnings as the key focus for the market outlook at the current juncture. On the earnings front, shares in Netflix have jumped after hours as it reported that a blitz of new programming attracted a surprisingly high 7.4 million new customers from January to March, reassuring investors who are betting the video streaming pioneer’s massive spending will fuel growth around the world.
Stock in Focus: Spark New Zealand (SPK:NZ / SPK:AX)
Spark New Zealand shares were higher yesterday as the telecommunications company said it has bought broadcasting rights to the 2019 Rugby World Cup and several other competitions for an undisclosed sum and has tapped Television New Zealand to provide free-to-air coverage and bolster production capability.
No price was disclosed, and the news follows from the announcement by Sky TV that it had been out-bid for the rights to the Rugby World Cup. The company said other programming could be offered if the World Cup is successful financially. The move by Spark is interesting, as it continues to transition away from the traditional Telco model with a focus on areas such as digital services (e.g. with the launch of digital media service Lightbox). While there are execution risks with Spark’s strategy, we do like their pro-active approach.
We currently have a BUY recommendation on Spark.
Australia & New Zealand Market Movers
The Australian share market continued to move higher on Monday (ASX 200 index +0.21%) as investors took news of missile strikes in Syria over the weekend in their stride. Miners were some of the strongest performers on the market as higher aluminium prices provided a supportive backdrop for South32 and Alumina. In other news, shares in Virgin Australia were higher as it revealed that 93% of shareholders with "unmarketable" parcels of shares (less than 500) had agreed to sell their stock back to the company, which will then cancel the shares.
The New Zealand market was slightly lower yesterday NZX 50 index -0.10%) in relatively subdued trading, led by Ebos Group, Ryman Healthcare, Air New Zealand and Fletcher Building. Comvita fell after a profit warning while A2 Milk gained on news of a deal in South Korea. Milk marketer A2 said it had signed an exclusive distribution deal with Yuhan Corp in South Korea, more than a decade after an earlier foray into that country which ended in litigation. The deal will see Yuhan promote and distribute a2 branded products in South Korea, sourced from New Zealand and Australia, with nutritional products produced by Synlait Milk, it said.
3 Things Markets Will be Watching this Week
1. Corporate earnings season has kicked off in the US, with the major banks being first to announce quarterly profits.
2. Chinese GDP data is published at the start of the week.
3. The latest Australian unemployment figures will be announced on Thursday.
Have a Great Day,
Team