Global markets were mixed overnight, with US Stocks little changed as Apple-led losses in tech stocks were offset by gains in consumer discretionary and energy stocks, which helped the S&P 500 inch up to a record intra-day high.
Closer to home, election uncertainty continues to dampens investor enthusiasm in NZ, while the Australian market was more or less flat yesterday after rallying early in the week. The Aussie mining sector has performed well in recent months, primarily on the back of improving commodity prices and what was generally a solid set of profit results in earnings season – with several of the larger mining stocks cutting debt levels and increasing dividend payments to shareholders. Our top sector pick for some time now has been BHP Billiton.
Stock in Focus: BHP Billiton (BHP.AX)
We have been vocal supporters of mining giant BHP Billiton and prefer BHP over other miners as a medium-term investment given BHP is highly diversified by region and commodity type. Given its large scale it can also operate at relatively low cost.
In its recent result, BHP saw operating earnings recover +64% from last year due to favourable commodity price movements and lower unit costs. BHP experienced a reduction in unit costs by over 40% with over US$12Bn in productivity gains and continued to outperform their peers in this regard. We see the result as an example of what BHP is capable of when commodity prices recover, as a low cost and efficient mining company.
We are currently BUY rated on BHP.
Members can login to read our latest full update on BHP.
Australia & New Zealand Market Movers
The Australian share market was slightly lower on Wednesday (ASX 200 index -0.04%) as the market could not hold on to early gains with losses from Telstra offsetting gains for miners and banks. Leading the index was Mayne Pharma, which rallied 13% to 73¢ on the heels of generics industry leader Teva Pharmaceutical Industries, which surged 7% in Tel Aviv on an asset sale proposal.
The New Zealand market continued to drift lower yesterday (NZX 50 index -0.17%) as election uncertainty dampens investor enthusiasm with Sky Network Television and Kathmandu Holdings dropping while CBL Corp bounced from its recent decline. Outside the benchmark index, Turners Automotive Group was halted at $3.36 on the NZX. It intends to raise as much as $30 million by selling new shares to help fund future growth and provide more liquidity for its stock.
3 Things Markets Will be Watching this Week
1. Important Australian employment data is set to be released on Thursday.
2. US inflation data is published at the end of the week.
3. US politics as investors are concerned around the Trump Administration’s ability to pursue its pro-growth agenda.
Have a Great Day,
Team
