Global markets continued to rally overnight, as US stocks eked out gains to consolidate near a one-month high, helped by advances in the healthcare and industrial sectors and as financials shrugged off Morgan Stanley’s disappointing earnings.
Closer to home, the ASX and NZX continued their positive trend to start 2019, with the ASX recovering to a 2-month high as sentiment continued to improve yesterday amid some strong quarterly results from South32, Woodside Petroleum and Whitehaven Coal.
Once again, in the immediate future, the US corporate earnings season is the near-term focus for markets. During company reporting periods, investor attention usually turns back to company profits rather than economic issues etc. Investor sentiment looks to be improving so far this year, and we continue to watch developments closely.
Stock in Focus: Kathmandu (KMD:NZX / KMD:ASX)
Kathmandu shares continued to recover yesterday, after falling sharply on its trading update, as the Christmas period failed to deliver on management expectations, offsetting the strong first quarter performance of the 2019 financial year.
Despite expanding gross margins, same store sales across the group fell -1%. We have held a cautious view towards the retail industry for some time now, and Kathmandu have bucked the trend and continued to deliver growth in the past due to their unique product offering.
We think consumer spending particularly on discretionary items (such as the products Kathmandu sells) will be under pressure over the near term as the Australian and New Zealand economies see falling house prices and tightening credit. We believe the share price fall has now partially reflected the difficult times ahead, although do not see much upside potential at the current juncture.
Australia & New Zealand Market Movers
The Australian share market was in positive territory on Thursday (ASX 200 index +0.26%) and while trading the ASX, extended its two-month high. In stock news, South32 led the market after announcing a strong quarter of production. Woodside Petroleum shares rose after the company reported a 43 per cent jump in fourth-quarter sales revenue, driven by a strong December quarter for LNG plants. Shares in online retailer Kogan, which have been beaten up in recent times, soared +22 percent as it announced record trading during the peak Christmas period, driven particularly by Black Friday and Boxing Day sales.
The New Zealand market was higher yesterday (NZX 50 index +0.56%) as sentiment continued to benefit from positive offshore leads. In stock news, New Zealand Refining said record throughput in the final six months of 2018 helped it recoup some of the losses from its extended shutdown earlier in the year.
3 Things Markets Will be Watching this Week
- US earnings season begins with big Wall Street banks announcing profits. Weak guidance from several notable companies such as Apple and Macy's have heightened the focus on US earnings growth.
- US politics continue to dominate headlines, with the ongoing partial shutdown of the US Government.
- The UK Parliament votes on Brexit on Tuesday.
Have a Great Day,