Global markets were mixed on Friday as the US market recovered ahead of the US Independence Day break. Friday night's moves in US shares were met with some relief by investors, after hints of reduced stimulus from major central banks such as the European Central Bank last week spooked equity markets in the prior session.
While there has been volatility in markets recently, it should be remembered that the S&P 500 has experienced its biggest gain for the first half of the year since 2013, while the Nasdaq Composite's first-half gain was its best in eight years.
Closer to home, both the Australian & NZ markets fell on Friday following global moves. The Australian market (measured by the ASX 200) ended June flat, while the NZ market (measured by the NZX 50) gained 2.5% for the month.
Stock in Focus: Spark (SPK.NZ / SPK.AX)
In stock news, Telco SPK held its investor day on Friday, setting out some pretty aspirational targets. Shares were lower on Friday although we believe this should be seen in light of a broader market sell-off and profit taking was likely given the strong run in SPK shares of late.
Spark reiterated how a strategic shift from Telco to Digital Services which commenced in 2013 has driven positive change for the business with management’s success surprising many in the market. Spark believe they can maintain their earnings growth which will support its attractive dividend yield. In terms of some detail, Spark are targeting 0% to 2% revenue growth in IT Services/Mobile, while continued cost cutting is expected to support margins (Spark currently has achieved operating margins of over 30%).
We are currently BUY rated on SPK shares.
Members should look out for a full update on SPK to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market fell sharply with heavy volume on Friday (ASX 200 index -1.66%) as global investor complacency gave way to fear following a concerted campaign by central banks warning interest rates were set to rise. Global investor jitters were compounded by the surge in currencies against the US dollar. In stock news, US private equity giant TPG Capital has ditched plans for a $2.76 billion takeover of Fairfax Media, clearing the way for rival bidder Hellman & Friedman to make an offer.
The New Zealand market fell on Friday (NZX 50 index +0.8%) joining an Asia-wide slide, even as the benchmark index finished its strongest month this year, with Spark New Zealand and Xero leading the decline. Spark looks to be experiencing some profit taking as the Telco held its investor day, while Xero followed weakness across Technology stocks globally. Tegel bucked the trend as the stock continues to rally post its recent full year profit result.
3 Things Markets Will be Watching this Week
1. How the US Technology sector trades following the recent pullback.
2. Minutes from the US Federal Reserve’s June meeting will be released on Wednesday.
3. Important US employment data is released end of the week.
Have a Great Day,
Team