Global markets were lower overnight as concern around rising tensions between the US and North Korea put investors on the defensive overnight, knocking the wind out of equities across Europe and depressing sentiment on Wall Street. As geopolitical risks have risen there was also demand for safe haven assets such as gold and the Japanese Yen.
Even with the geopolitical backdrop, investor focus appears to remain on the current earnings season for now.
Stock in Focus: James Hardie Industries (JHX.AX)
Building materials supplier James Hardie has seen its shares have come under selling pressure this week following a disappointing quarterly profit announcement.
JHX’s first-quarter profit fell 34%to $US57.4 million ($A72.6 million), partly due to higher production costs as earnings margins have been pressured from manufacturing inefficiencies and higher production costs.
At the top line, the company's net sales for the three months to June 30 grew 6%, to $US507.7 million, compared to the same period last year, despite being hit by capacity constraints.
We have been supporters of JHX given its exposure to the US housing market recovery which we believe is set to be a multi-year theme. Further, JHX earns the majority of its revenue offshore, so is set to benefit from weakness in the Australian dollar.
We are currently BUY rated on JHX.
Members should look out for a full update on JHX to be released in our next weekly report.
Australia & New Zealand Market Movers
The Australian share market made gains yesterday (ASX 200 index +0.38%) as the market defied rising US-North Korean tensions and the negative lead from Wall Street as the major banks bounced.
The major news flow was Commonwealth Bank (Australia’s largest Bank) announcing profits which narrowly beat earnings forecasts, sparking bargain hunting in the lenders. Commonwealth Bank has posted its eighth record annual cash profit of $9.9 billion, however a money laundering investigation has weighed on sentiment around the stock.
The New Zealand market was higher on Wednesday (NZX 50 index +0.22%) with SkyCity Entertainment Group dropping to a five-month low on mediocre earnings while Mainfreight and A2 Milk Co gained. A2 Milk touched a new record high for a stock which has soared 124% this year. The recent rally has come after several brokers upgraded their expectations for the stock ahead of its results later this month.
3 Things Markets Will be Watching this Week
1. It’s all about corporate profits as Earnings season continues across the US and Australia.
2. Local earnings season kicks off in New Zealand.
3. The Reserve Bank of New Zealand releases an interest rate decision Thursday, with it being Governor Graeme Wheeler's last monetary statement.
Have a Great Day,
Team