Global markets were higher overnight as gains in financial and energy shares helped equities recover from initial declines, but investors remained cautious about the potential for another flare-up in US-China trade tensions.
In the UK, Boris Johnson said he will ask the Queen to suspend parliament from mid-September to mid-October in a move to prevent rivals from blocking a no-deal Brexit. There are hopes that European leaders would return to the Brexit negotiating table with the UK. Despite the optimism, analysts suggest a deal remains unlikely. "According to Bloomberg, the UK government official said that both Merkel and Macron appeared willing to talk at the G7 meetings over the weekend", however CBA currency strategist Kim Mundy said. "At this stage, renegotiating a deal seems like the least likely outcome. Instead, the likelihood of a hard Brexit or early general elections remain the most likely outcomes".
Closer to home, the domestic earnings season winds down this week, and across Australia & NZ it has been a mixed bag of profit announcements. We will be reporting full updates on stocks under our coverage in our weekly report.
Stock in Focus: Fisher & Paykel Healthcare (FPH:NZX / FPH:ASX)
F&P Healthcare led the NZ market higher yesterday, up 6% as the breathing mask respirator maker increased its annual earnings forecast by $5 million to $245-$255 million on the assumption of a weaker kiwi dollar.
It was approximately a ~2% lift to prior profit guidance, factoring in a lower NZDUSD at 0.64 vs 0.65 previously – likely explaining most of the upgrade. While management have previously alluded to near term headwinds in of lower revenue growth from masks, and margin squeeze from opening Mexico, they also see tailwinds in the second half of the year from FX, R&D tax credits, and litigation costs falling away.
We remain positive on FPH as a medium term high quality healthcare investment..
We currently have a BUY recommendation on FPH.
Members should look out for a full update on FPH to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian market was higher again yesterday (ASX 200 Index +0.45%) on another mixed day of trading on the back of gains by major resources stocks. Afterpay Touch was also among the market leaders as it reported strong customer growth in the UK and announced a strategic partnership with VISA "to support future expansion and platform innovation in the US".
The New Zealand market bounced on Wednesday (NZX 50 Index +1.07%) led higher by Fisher & Paykel Healthcare on a modest increase in forecast earnings.
Port of Tauranga rose as record cargo volumes underpinned its 6% profit gain. It warned log volumes will be weaker in the year ahead but said it will continue to pay special dividends having completed its major capital spending programme in 2016. Scales Corp was a touch lower as it reaffirmed annual guidance. It reported a record first-half profit due to one-off gains on asset sales but said sales were stronger across all divisions in the period. Genesis Energy reported a 16% increase in underlying earnings. The electricity company's stronger retail earnings offset a flat performance from the generation arm and weaker oil production from its interest in the Kupe field.
3 Things Markets Will be Watching this Week
- Trade War related news-flow is likely to dominate headlines.
- Australasian company reporting season moves into its latter stages.
- Escalating geopolitical tensions between Hong Kong & China are also creating nervousness.
Have a Great Day,