Global markets were mixed overnight, as shares on Wall Street moved between gains & losses during a choppy session. Traders remain on edge after Friday's rout which was driven by renewed worries of a slowdown in global economic growth.
The stock sell-off that gripped markets Friday rolled over into Asia on Monday, with a gauge of the region's shares experiencing its biggest decline of 2019 so far. Australian shares also experienced their second worst trading day of the year, while the NZ market held up relatively well with modest falls.
As we mentioned yesterday, recent weakness in European and US data has renewed worries about the world economy. Part of the US yield curve has inverted for first time since 2007 (i.e. long-term interest rates are lower than short term rates) following the soft manufacturing data, which is a warning that the bond market is expecting a US economic recession. This does not necessarily imply a recession is a certainty, although there remains a large question mark around global economic growth. Hence market volatility is likely to remain elevated in our view, and we are likely in the latter stages of what has been a very long bull market since the global financial crisis in 2009.
Stock in Focus: Fisher & Paykel Healthcare (FPH:NZX / FPH:ASX)
FPH shareholders can breathe a sigh of relief as the costly and lengthy patent dispute with rival ResMed is over, for now. FPH shares are back at close to all-time highs after the news, shedding the litigation driven negative sentiment that had weighed on the share price.
Taking a bigger picture view, FPH has experienced strong market share and there remains growth potential looking forward given the tailwinds of an ageing population and our expectations around the NZ dollar.
We remain positive on FPH as a solid defensive healthcare holding, although new investors may want to wait for some share price consolidation post the strong run year to date.
We currently have a BUY recommendation on FPH.
Australia & New Zealand Market Movers
The Australian share market sold off on Monday (ASX 200 index -1.11%) as Australian shares fell to their second-worst session this year, wiping $20.5 billion of value from the ASX. The major cyclical stocks led the retreat on the local share market and energy stocks were weaker as global oil prices extended their losses from last week. Tech sector growth stocks also retreated from their strong year-to-date performances, with Altium, Appen, Wisetech Global, and Afterpay Touch experiencing large pullbacks. The market slide was capped slightly by gains in gold mining, real estate investment trust and infrastructure stocks.
The New Zealand market was lower yesterday (NZX 50 index -0.33%) as New Zealand shares joined a global decline as investors sold off equities, but managed to outperform other markets across Asia. Stocks trading near records pulled back, such as Meridian Energy and Contact Energy, while Spark shares bucked the trend and jumped higher. Summerset Group announced itis buying plots of land in Rangiora and Blenheim for two new villages. The retirement village operator expects to spend more than $250 million developing the sites.
3 Things Markets Will be Watching this Week
- Signals around the health of the global economy will remain a focus for investors.
- US economic growth (GDP) figures are published Thursday night (AU/NZ time).
- The Reserve Bank of NZ makes an interest rate decision on Wednesday.
Have a Great Day,
Team
