Global markets were mixed overnight as European markets rallied but Wall Street continues to whipsaw investors.
As we touched on yesterday volatility has returned to markets, in a big way. While the US markets started the day higher they sold off heavily late in the day, with the Tech sector once again experiencing heavy losses. The Tech sector has led the market in recent times and there is likely to be some profit taking, while the privacy breach concerns around Facebook are also weighing on sentiment towards the sector.
Interestingly, according to Blomberg about 70% of institutional investors are "somewhat concerned" that a 20% correction in the US stock market could come within the next two years, and almost 60% of those polled say the S&P 500 Index will underperform its 20-year annual average return in 2018. We are watching developments closely and reiterate it is important for investors to remain calm during periods of heightened volatility.
Stock in Focus: Invocare (IVC:AX)
Shares in funeral services company Invocare (IVC) remain under pressure and have retraced significantly from highs reached late last year.
IVC’s 2017 financial year results were negatively received despite reporting net profit after tax of $97.4m, which was up +37.3% from last year and as operating (underlying) net profit after tax was up +10.6% to $63.5m. The market viewed the resulted as below expectations and many commentators believe potential increases in interest rates will mean InvoCare’s shares will trade at a lower price multiple relative to earnings.
We note there were several one-off shut downs of many sites in the fourth quarter due to refurbishments and enhancement’s as part of InvoCare’s Protech & Grow 2020 Plan. Over the longer-term believes IVC is set to continue to benefit from favourable demographics of an aging population and the investment case remains robust.
We currently have a BUY rating on IVC.
Australia & New Zealand Market Movers
The Australian share market bounced on Tuesday (ASX 200 index +0.72%) from five-month lows as worries about a global trade war retreated, with miners propelling the index higher. Of the majors, BHP, Rio Tinto and South 32 made solid gains, while Whitehaven also jumped after a broker upgrade. Not all miners joined in the advance, however, with Newcrest Mining taking a breather after three sessions of strong gains and Fortescue was down slightly after telling investors it has downgraded its iron ore price expectations for fiscal 2018.
The New Zealand market was higher yesterday (NZX 50 index +0.09%) led by Synlait Milk and a2 Milk, with Sky Network Television rebounding from prior heavy selling. Sky TV released an investor briefing showing it's moving to provide more on-demand services as it works to retain its sports rights and stabilise core earnings. It plans to introduce upgraded set-top boxes with on-demand functions and the ability to support higher-quality content, along with IP-only set-top boxes which deliver content via fibre instead of via satellite and an app-only platform.
3 Things Markets Will be Watching this Week
1. Global politics remain in focus as risks of a potential Trade War between the US and China grow.
2. A number of US Federal Reserve members due to make speeches this week, and investors will be looking for clues around the outlook for further interest rate hikes.
3. US GDP data and personal inflation data is released on Wednesday
Have a Great Day,
Team
