Global markets were higher overnight as stocks on Wall Street were supported by hopes for more stimulus for China’s slowing economy, and a jump in Netflix shares which helped investors look past weak earnings announcements from JPMorgan and Wells Fargo.
Netflix has had a very strong start to 2019 and leapt more than +7% after saying it will increase prices for US subscribers by between 13% and 18%. As we mentioned in our outlook report yesterday, we see the current US corporate earnings season as very interesting given weak guidance from several notable companies such as Apple (on the back of weak Chinese demand). Earnings had been a clear positive factor for driving the bull market, and we will be watching the current earnings season closely.
Also, in the Brexit vote this morning the British Parliament handed a large defeat to Prime Minister Theresa May's Brexit plan, rejecting it by a margin of 230 votes, forcing her back to the drawing board with her domestic critics and the European Union.
Stock in Focus: Costa Group (CGC:ASX)
Shares in fresh fruit & vegetables producer Costa Group continue to rebound from its heavy sell-off last week which came on the back of a surprise profit downgrade for the 2019 financial year due to difficult trading period over December and January.
The promising avocado category experienced weaker than expected demand, and the Berries and tomato divisions also experienced similar over supply issues. As a result, Costa expect their 2019 net profit to remain flat with the previous year.
We believe this highlights the cyclical risk faced by the agriculture industry – but think nothing fundamentally has changed and this update can be viewed more as a hiccup on Costa's growth path. We have a positive medium-term view on CGC as it benefits from the strong demand for food globally as well as being attractive to health conscience consumers.
Members should look out for a full update on Costa to be released in today’s weekly report.
Australia & New Zealand Market Movers
The Australian share market was higher on Tuesday (ASX 200 index +0.71%), boosted by signs from China the country is considering fresh measures to stimulate stuttering growth. Australia's fortunes are linked to China's economy — for better or worse. The ASX has recovered in 2019 and is trading at a 2-month high.
The New Zealand market was little changed yesterday (NZX 50 index -0.04%) as Spark slid while gains in A2 Milk helped support the index. The property companies continue to fare well given that the central bank has continued to affirm that rates will stay low or could even be cut. At the same time Kathmandu recovered for another day following its recent fall on lower Xmas period sales.
3 Things Markets Will be Watching this Week
- US earnings season begins with big Wall Street banks announcing profits. Weak guidance from several notable companies such as Apple and Macy's have heightened the focus on US earnings growth.
- US politics continue to dominate headlines, with the ongoing partial shutdown of the US Government.
- The UK Parliament votes on Brexit on Tuesday.
Have a Great Day,
