Global markets were lower overnight, although stocks on Wall Street pared losses over the day. Apple led a decline in technology stocks and a number of weak corporate results added to the dour mood. We reiterate that given the high level of the market the current US earnings season is as important as ever in terms of supporting company share price valuations.
Closer to home, both the ASX and NZX added to recent gains, with the ASX experiencing its 10th straight day of gains while the NZX inched to a new all-time high.
The big news last night was that NZ First Leader Winston Peters has chosen the Labour Party as a coalition partner, with support from the Greens to form government. The initial market reaction has been a fall in the NZ dollar, which is struggling to hold above the 70cent mark against the US dollar.
Chart in Focus: NZD/USD
The New Zealand dollar fell after NZ First leader Winston Peters said he would support a Labour-led government, saying the nation voted for change.
As we have discussed previously, we do not expect politics to have a long-lasting impact on markets overall. Investors can look at recent events of Brexit and the election of Donald Trump as cases where it is dangerous to take a view on markets given politic events. Further, a weaker NZ dollar may support stocks with offshore earnings/exporters, and a similar dynamic occurred in the UK as the Pound fell post Brexit.
In saying that, there may be an impact on specific sectors such as property sensitive sectors (which have been highlighted by several market commentators) if certain policies are seen as likely to be implemented such as immigration cut backs. At the moment it is very unclear what major policy stances the newly formed government will implement, and we will be watching developments as they unfold.
Australia & New Zealand Market Movers
The Australian share market was a touch higher yesterday (ASX 200 index +0.10%), keeping intact their powerful recent winning streak as gains in the major banks offset selling in the mining sector. What has been encouraging is that the recent rally has been broad based.
In terms of economic news flow, Jobs data released by the Australian Bureau of Statistics showed unemployment ticked lower to 5.5%in September, and traders pushed the Australian dollar higher in response as they bet on higher odds of a rate rise from the central bank.
There were a slew of quarterly production reports for the mining sector, including from South32 which warned in its September quarter report that it may be facing cost pressures from rising raw material input costs and a weaker US dollar.
The New Zealand market was slightly higher on Thursday (NZX 50 index +0.11%) nudging the NZX 50 market Index to a new record, as Comvita continued to benefit from yesterday's earnings upgrade and Port of Tauranga said first-quarter volumes pointed to stronger annual profit in 2018. Shares in Sky Network Television slipped after the pay-TV operator reiterated its falling subscriber numbers at its annual meeting.
3 Things Markets Will be Watching this Week
1. Quarterly US corporate profit announcements, with the level of the market making the current earnings season as important as ever.
2. Australian employment data is published on Thursday.
3. Minutes from the last Reserve Bank of Australia meeting are released on Tuesday.
Have a Great Day,
Team