Markets Jump on US Deal Hopes | Macquarie Keeps Delivering

13 February 2019

Global markets surged higher overnight, in a broad-based rally fuelled by a tentative deal reached by American lawmakers to avoid another partial government shutdown and hopes that the US-China trade talks could result in an agreement.

President Donald Trump told reporters at the White House that he could allow a looming tariff deadline to "slide for a little while" if he feels a deal with China is close.

Closer to home, there have been growing views that there will be interest rate cuts across both sides of the Tasman and it will be an interesting to hear from the RBNZ which make an interest rate decision this afternoon.

 

Stock in Focus: Macquarie (MQG:ASX)

We have been supporters of Macquarie for some time now, and it has been a strong performer for us in the Australian market as shown below. 

A positive trading update from Macquarie helped lift the ASX market on Tuesday. Macquarie maintained its profit guidance in a trading update, saying it expected an increase of up to 15 per cent in the 2019 fiscal year compared with the 2018 fiscal year. The bank said trading conditions had been satisfactory through the December quarter with "significant realisations" across the group.

While Macquarie is exposed to volatile factors such as market conditions and exchange rate moves, factors continue to move in its favour and it has not suffered with other financial stocks with the fall-out from the Royal Commission into the banking sector.  Macquarie is also not highly leveraged to the Australian property market – which arguably made it less risky than banking peers given current risks around housing markets.

We currently have a BUY (High-Risk) rating on Macquarie.

Members can login to read our full reports on Macquarie.

 

 
Australia & New Zealand Market Movers

The Australian share market was in positive territory on Tuesday (ASX 200 index +0.30%) as muted gains by the index heavyweights ended a two-day run of losses. A positive trading update from Macquarie helped lift the ASX market as the Australian season hit the quarter way mark today.  However, Challenger Financial and toll road manager Transurban both missed estimates by a very wide margin. Challenger reporting a 97 per cent fall in profit, citing market volatility, industry disruption and political uncertainty as the major factors behind the fall. Transurban’s operating earnings rose 9.8 per cent to $1 billion, but still disappointed analyst expectations of $1.03 billion.

 

The New Zealand market rallied yesterday (NZX 50 index +0.77%) as growing bets for an interest rate cut by the Reserve Bank stoked demand for utility companies such as Mercury NZ, Meridian Energy and Genesis Energy with steady dividends. Contact Energy continued to make gains after reporting increased earnings and a bigger-than-expected dividend. While Contact has underperformed other power companies in recent years, Monday’s result was not a bad one. A weaker kiwi dollar was also a boost for exporters such as Fisher & Paykel Healthcare, while Pushpay continued to sell-off.

 

3 Things Markets Will be Watching this Week

  1. US corporate earnings season gets into its latter stages.
  2. Local earnings season also kicks off in NZ and gets further underway in Australia this week.
  3. The Reserve Bank of New Zealand holds a press conference & makes an interest rate decision Wednesday.

 

Have a Great Day,
 

Team

President Donald Trump told reporters at the White House that he could allow a looming tariff deadline to "slide for a little while" if he feels a deal with China is close.

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