Global markets were mixed overnight as stocks on Wall Street swung between relatively small gains and losses. Once again, all eyes will be on monthly US inflation data which will be released Thursday morning (AU/NZ time) and investors appear to be in a holding pattern before the release.
Bank of America Merrill Lynch has released its February survey of global fund managers and interestingly it showed a marginal increase in cash amid a rotation out of equities. Average cash balances edged to 4.7% from 4.4% in January, while the average allocation to equities dropped to a net 43% from a net 55% overweight. Still investors remain bullish, the survey found, with respondents indicating that they expect the bull market to peak on average with the S&P 500 at 3100. Key concerns raised were an inflation-induced bond crash, a policy mistake by the Fed or European Central Bank and market structure.
Stock in Focus: Wellard (WLD:AX)
Troubled live export company WLD released an early 2018 half year update last week and the market reaction was muted, although WLD shares have not sold-off during the recent market pullback.
Despite reporting another net loss after tax of -$7.5m with revenue for the half of $163.7m (almost half of the corresponding period last year) WLD has shown some signs of improvement. WLD chose to focus on earnings and avoid loss attributing contracts and in exchange chartered their vessels. As a result, WLD posted operating earnings of $8.9m, a turnaround of last year’s operating loss of -$5.3m. Once again the true turnaround in WLD’s profitability is set to occur when/if cattle prices (which have eased somewhat from record highs) drop
We currently have a HOLD rating on WLD.
Members should look out for a full update on WLD to be released in today’s weekly report.
Australia & New Zealand Market Movers
The Australian share market advanced yesterday (ASX 200 index +0.6%) for the first time in three sessions, as investors regained a bit of confidence following last week's global equity market turbulence. Australian investors also picked up stocks following a survey on business conditions and confidence compiled by NAB that showed companies are enjoying some of the most profitable sales and employment conditions ever recorded. Mining stocks were up while Lithium miners made stronger gains, with PIlbara Minerals jumping 9.4% after telling shareholders that a pre-feasibility study has supported its plan to more than double capacity at its Western Australian operation. Galaxy Resources and Orocobre also jumped.
The New Zealand market was higher on Tuesday (NZX 50 index +0.78%) led by Vital Healthcare Property Trust and A2 Milk after 5 days of losses. Insurer Tower said recent storms will have a financial impact of about $5 million after tax. It said it is too soon to know the extent of the damage done by Cyclone Gita, which hit Tonga last night having already passed through Samoa and American Samoa and may yet impact Fiji.
Fletcher Building will emerge from trading halt today, and has announced another $486m of losses in its construction division. Among other things, in response Fletchers have cut their interim dividend and the Chairman has resigned. We will release a full update on FBU in our weekly report.
3 Things Markets Will be Watching this Week
1. Local AU/NZ company profts as the earnings season continues.
2. US earnings season moves into its latter stages.
3. Closely watched US inflation data will be released Thursday morning (AU/NZ time).
Have a Great Day,
Team
