Global markets rallied on Friday with the Nasdaq (US Technology Index) back at all-time highs as the latest US wage data dampened worries about a faster pace of rate hikes.
The February US payrolls report released on Friday showed that wages lifted at a more muted pace last month, easing concerns about a marked spike higher in January (which sparked inflation concerns). The data showed a massive 313,000 jobs were added over the month (biggest gain in 18 months) while the unemployment rate was unchanged at 4.1%. The report illustrated the US economy is very strong, and encouraged investors that the US Federal Reserve is lifting rates at the right pace. As we have discussed before, inflation data is the key figure to watch this year as it will drive the actions of the US Federal Reserve and interest rates – monthly US inflation data is released Wednesday morning (AU/NZ time).
On the global political front, there were also a number of developments which helped investor sentiment. Australian steel and aluminium exports appear to be spared tariffs after the US President indicated close defence allies including Australia will be exempted. President Trump has also agreed to meet North Korean leader Kim Jong-un, who is committed to denuclearisation, a South Korean official said.
Stock in Focus: Harvey Norman (HVN:AX)
Shares in Harvey Norman (HVN) have been hit hard after the market was expecting more out of the integrated retailer’s half-year results. HVN’s net profit was reported at $207.7 million, down -19.3% from the previous corresponding period while sales in the franchise network were up 4.8% to $3 billion, but franchise network profit took a -2.9% hit to $167.2 million on competition and wages grounds.
Shareholders will take a 2c interim dividend downgrade from 14c per share to 12c per share and price pressure remains an issue with competitors like JB Hi-Fi Limited. We have held a negative view on HVN as it has its work cut out for it as global e-commerce giant Amazon makes its presence known in the Australian retail scene and as we believe the Australian and NZ housing markets have peaked.
We currently have a SELL rating on HVN.
Members should look out for a full update on HVN to be released in this week’s weekly report.
Australia & New Zealand Market Movers
The Australian share market was in positive territory on Friday (ASX 200 index +0.34%) finishing the week higher as markets warmed to the view the White House is backing down from starting an outright trade war. Results of the March quarterly rebalance for the ASX 200 were announced on Friday, which takes effect as of March 19 (the market index constituents are important as if a company is in the index then a number of funds are forced to buy shares in the company). Promoted into the ASX 200 are Ausdrill, Bellamy's Australia, Smartgroup and Xero at the expense of Australian Agricultural Company, HT&E and Myer.
The New Zealand market was higher on Friday (NZX 50 index +0.37%) led higher by a rebounding Metro Performance Glass. Spark New Zealand gained while Comvita fell. As with the ASX 200, the NZX 50 index (top 50 companies on the NZ market) March quarter rebalance was released after the close of trading Friday and will take effect at the end of the week. Metro Performance Glass was removed from the benchmark index, replaced by Gentrack Group.
3 Things Markets Will be Watching this Week
1. Global politics as details around trade tariffs to be implemented by the Trump Administration are announced.
2. US inflation data is released Wednesday morning (AU/NZ time).
3. NZ economic growth (GDP) data is published on Thursday.
Have a Great Day,
Team