Global markets were mostly higher again overnight, as shares on Wall Street rallied for another day. Strong earnings from Facebook added to optimism after the Federal Reserve’s dovish remarks, with investors awaiting the outcome of the US-China trade talks.
Investors have been encouraged by the US Federal Reserve which kept interest rates unchanged yesterday and was cautious about the pace and timing of any future hikes. The Fed’s pivot to a dovish position on future interest rate hikes as well as the run-off of its balance sheet has come as a bit of a surprise, and shows that Fed Chair Jerome Powell is not afraid to change his stance. Powell indicated in his remarks that the Fed had to take tightening financial conditions into account, and officials are worried about downside risks to economic growth.
Stock in Focus: Lynas (LYC:ASX)
Shares in Lynas were +7% higher yesterday as the mining sector had a strong session.
Lynas shares have been under pressure of late, after the Malaysian government ordered it must remove the radioactive waste that it had accumulated due to its activities over the past six years if it wants to continue operating in this country and extend its license. Lynas will also need to construct a permanent waste disposal facility or export the waste if an adequate site cannot be found.
In our view, Lynas provides an attractive investment for those wanting to gain indirect exposure to electric vehicle theme – which is a strong multi-year tailwind. However, as a miner of a commodity it is exposed to pricing risk, and the hazardous nature of processing the rare earths means it is also prone to regulatory risk. Unfortunately, regulatory risk at its LAMP appears to be the largest risk facing Lynas at the moment, as the demands by the Malaysian government have weighed down heavily on the share price recently. Management appear confident they can appeal the conditions imposed by the government. We think there is potential upside if they are able to sway the Malaysian government towards their favour.
Members can login to read our full reports on Lynas.
Australia & New Zealand Market Movers
The Australian share market was lower yesterday (ASX 200 index -0.37%) as a strong performance by the energy and mining sectors was not enough to save the ASX from being weighed down by troubled financials at the close. In stock moves, GetSwift shares dropped as much as -16% on Thursday after the logistics solutions group revealed a slowdown in revenue growth for the December quarter and reported rising costs from its legal battles and increased corporate governance requirements.
The New Zealand market was higher on Thursday (NZX 50 index +0.67%) led by A2 Milk Co, as local investors were buoyed the prospect of low US interest rates keeping equities attractive. In stock news, dairy giant Fonterra said local milk collection was tracking 4.1% higher in the seven months through December, buoyed by helpful weather conditions.
3 Things Markets Will be Watching this Week
- US corporate earnings season continues this week.
- The US Federal Reserve makes its first monetary policy decision for the year on Thursday morning (AU/NZ time).
- The UK parliament votes on a new Brexit plan on Wednesday morning (AU/NZ time)
Have a Great Day,
