Global markets were higher on Friday as the S&P 500 and the Nasdaq US indices posted their biggest weekly percentage gains in nearly seven years.
This saw the S&P 500 wipe its losses for the month, and actually end a volatile November up +1.8%. The NZ market followed suit, with the NZX 50 market index ending November with a +0.8% gain. By contrast, the Aussie market continues to underperform, and Australian shares are on track to record their worst December quarter since the global financial crisis following another sell-off during November – as the ASX 200 fell another -2.8% over the month.
Investors were encouraged last week by comments by Federal Reserve Chair Jerome Powell and subsequent minutes from the central bank’s latest meeting that suggested that the Fed will take a data-driven rather than ideological approach to future rate-hikes.
The weekend’s high-stakes meeting between the US and China at the G20 Summit appears to be positive, as presidents Donald Trump and Xi Jinping agreed to a 90-day trade war truce. Today’s market reaction will be interesting, and we are expecting a relief rally.
Stock in Focus: Coca-Cola Amatil (CCL:ASX)
After experiencing a solid recovery for most of this year, shares in Coca-Cola Amatil (CCL) plunged on Friday after it held a poorly received investor day in Sydney.
CCL it has decided to sell its struggling SPC fruit and vegetable processing business, abandoning its former plans to turn it around. The beverage company said it is expecting a $10 million loss for SPC in the 2017/18 financial year. The group warned investors that 2019 would be another “transitional” year for investors.
The CEO also warned that “volumes” in Australia in 2018 were also “tracking slightly below 2017” which is a bad sign given the increased investment the business is making in trying to grow volumes in the struggling Aussie division.
The group has attempted to diversify and product innovate in recent times, but its key product remains the Coca-Cola fizzy drink that is losing popularity with more health-conscious consumers. The CEO stated that the group remained committed to its mid-single-digit earnings per share growth target in the medium term, but clearly the market is not convinced.
We currently have a HOLD recommendation on CCL. Members should look out for a full update on CCL to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market sold off on Friday (ASX 200 index -1.58%) as investors awaited the key G20 summit over the weekend. Myer's board directors have avoided being thrown out by shareholders despite a "second strike" against the company's remuneration report amid declining sales and a rocky share price. At Myer's annual general meeting (AGM) on Friday, 37% of shareholders voted against the company's remuneration report, but directors managed to avoid being dumped.
The New Zealand market was higher on Friday (NZX 50 index +0.33%) as shares rose for a fourth day in heavier-than-usual trading as major institutional investors reallocated their portfolios, pushing up heavyweight stocks including Spark New Zealand and Meridian Energy. Outside the benchmark, Pacific Edge fell 13% to 35 cents, matching the price paid in a placement raising $7 million.
3 Things Markets Will be Watching this Week
- Several US Fed members make speeches this week, with Chair Jerome Powell set to make another speech on Friday.
- The Reserve Bank of Australia makes an interest rate decision on Tuesday.
- There is an OPEC meeting later in the week, which will be interesting given the recent drop in the oil price.
Have a Great Day,
