Global markets were little changed overnight with Wall Street touching new record highs as volatility remains muted. News that US Secretary of State Rex Tillerson denied reports that he considered resigning reduced fears of fresh turmoil in the Trump administration.
Unlike the US & NZ share markets, which have started the month of October by notching fresh record highs, the ASX is struggling to stay within the trading range it has been trapped in since the middle of May.
Stock in Focus: Xero (XRO.NZ / XRO.AX)
Xero shares have surged this year and it has been the best performer in our NZ model portfolio, having doubled since we first recommended it in September 2015. There was more positive news-flow yesterday as Xero's drive to sign new customers in the UK picked up the pace in the first half of the current financial year, adding more than 40,000 new clients and putting it alongside the software developer's home market of New Zealand in terms of subscriber numbers.
"Passing through quarter of a million UK subscribers with a focus on strong revenue growth as well sends clear signals that our global platform is delivering powerful value to accountants, bookkeepers and small businesses – and we are only getting started" chief executive Rod Drury said.
The UK is seen as another engine of growth for Xero and it was a pleasing update. Success in the US market remains key for Xero, although they are becoming more international, with expansion into South East Asia also looking promising. Given the large amount of offshore sales, Xero is clearly also exposed to movements in the exchange rate.
We are currently BUY rated on Xero.
Members should look out for a full update on Xero to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market fell on Wednesday (ASX 200 index -0.86%) weighed down by the retailers and banks. While losses were quite broad-based, blue-chip names CBA and QBE provided a bit of relief from the general gloom. Both QBE and CBA have been coming under selling pressure in recent times and there are signs investors now believe both stocks are now oversold.
The New Zealand market grinded higher yesterday (NZX 50 index +0.21%) hitting a new record high led higher by A2 Milk Co hitting a new record and Metro Performance Glass extending its recovery from a record low this week. In other news, Property for Industry dropped as it announced it has bought nine properties for $69.5 million to extend the average lease term of its existing portfolio and acquire development opportunities in the future and will pay for the deal through a discounted rights issue.
3 Things Markets Will be Watching this Week
1. The Reserve Bank of Australia makes an interest rate decision on Tuesday.
2. While markets have largely brushed off the geopolitical situation with North Korea, risks certainly remain.
3. Important monthly US employment figures are released at the end of the week.
Have a Great Day,
Team
