Global markets rebounded overnight as concerns about a US-triggered trade war eased and Wall St rallied.
There has been uncertainty in markets after President Donald Trump announced plans to impose 25% tariffs on steel imports and 10% on aluminium. Canada, Great Britain and the European Union have already expressed dismay over the introduction of the tariffs, which have sparked fears of a trade war.
Overnight US House Speaker Paul Ryan urged the Trump administration not to move forward on new tariffs, citing risks to the economy. While not backing down, President Donald Trump tweeted earlier that Canada and Mexico could avert the tariffs by agreeing to a new North American free trade agreement. As we touched on yesterday, the trade developments are important for both Australia and NZ given the reliance of both economies on trade.
Stock in Focus: Coca-Cola Amatil (CCL:AX)
Shares in CCL have been trending higher since late last year and appear to have found a share price floor after a challenging period. CCL recently released its full year profit results which were well received by the market.
In terms of some detail, revenues fell -3% to $5,024m, and operating earnings (EBITDA) fell -0.7% to $679m. Market expectations for the company were low as the Australian beverages segment (CCL’s largest division) continues to struggle, and underlying earnings fell -6% over the period. The company is attempting to re-establish its portfolio as core products have been on the decline in Australia, while other segments such as NZ & Fiji, and Indonesia & PNG showed strong growth.
While CCL is facing headwinds, there is negativity around the stock which has been reflected in the share price performance in recent years. We have also CCL as an attractive option of income investors, given its healthy dividend yield of 5.3% at current prices.
We currently have a HOLD rating on CCL.
Members should look out for a full update on CCL to be released in tomorrow’s weekly report.
Australia & New Zealand Market Movers
The Australian share market declined on Monday for the fourth straight session (ASX 200 index -0.57%) with mining stocks in particular impacted by the ongoing uncertainty following the surprise announcement last week that the US will impose tariffs on imported steel and aluminium. In terms of big movers, Myer shares had a good day, with the firm recovering some of the ground it has lost recently with a 15% advance. Retail Food Group fell another -36.5% after trading resumed in its shares following profit and restructuring announcements on Friday. Shares in the troubled owner of the Gloria Jeans and Donut King chains hit their lowest level since early 2009 after the company last week booked heavy writedowns and revealed store closures.
Xero shares were lower as the company announced chief executive and co-founder Rod Drury will next month hand over the day-to-day running of the company to veteran tech executive Steve Vamos, who's been tasked with transforming the software firm to a multi-national organisation.
The New Zealand market started the week off lower (NZX 50 index -0.10%) as Sky Network Television sank to a record low having halved its interim dividend and as it cut prices last month in the face of increased competition. On the flipside, Air New Zealand and Fisher & Paykel Healthcare gained
3 Things Markets Will be Watching this Week
1. Local AU/NZ company earnings season moves into its latter stages.
2. Global politics as details around trade tariffs to be implemented by the Trump Administration are announced.
3. The Reserve Bank of Australia makes an interest rate decision on Tuesday.
Have a Great Day,
Team
