Global markets were higher overnight as investor optimism returned. Shares on Wall Street rebounded strongly, lifted by a rally in Wal-Mart, technology stocks and hopes that Republicans are heading in the right direction on tax reform.
Wal-Mart leapt to a record high after the retailer reported the largest sales rise in more than eight years. We have come to the end of the US corporate earnings season and overall it looked to be a solid round of quarterly profit announcements. As discussed previously, we felt that given the high level of the overall market, the recent earnings season was as important as ever in terms of supporting relatively high stock valuations – and results did not fall short of high expectations, with the market continuing to trend higher.
Stock in Focus: A2 Milk (:NZ / A2M:AX)
While shares in A2 Milk have had an amazing run this year (up +265% year to date), it has been a volatile ride of late.
A2 shares became overextended and hit record highs in late October, before sharply pulling back large volumes as investors took profits. Post the pullback A2 presented at a UBS conference which the market digested well and buyers appear to have returned to the market. Yesterday there was more of the same with A2 providing the biggest boost to the NZX market index.
Given the extreme volatility of late, we would like to some price stability before potentially changing our recommendation on A2 and continue to remain on the side-lines. A2 is also set to hold its AGM on the 21st of November, which may provide an opportunity for management to provide a more detailed update.
We are currently HOLD rated on A2 Milk. Members can login below to read our latest report on A2 Milk.
Australia & New Zealand Market Movers
The Australian share market ended trade yesterday in positive territory (ASX 200 index +0.16%) as shares overcame early wobbles to finish moderately higher with the major Banks reversing early losses. It was a busy day for news flow which featured a plethora of annual shareholder meetings, a key jobs release, reports of a takeover offer for Santos, and the first day of trade for Fairfax Media spin-off, Domain. The 13% surge in the shares of Santos also provided a fillip to the market as the oil and gas provider confirmed that it had received the sketch of a takeover offer from a US player in August.
The New Zealand market rallied on Thursday (NZX 50 index +0.43%) led higher by Kathmandu Holdings and market index heavyweight A2 Milk Co, while CBL Corp dropped. Outside the benchmark index, Pushpay Holdings released results showing the Auckland-domiciled, US-headquartered company's loss widened to US$12.5 million in the six months ended Sept. 30, from US$11.3 million a year earlier, while revenue more than doubled to US$29.7 million from US$12.1 million. Pushpay also said it is planning on a US listing and likely a capital raising within the next 15 months, but that won't mean de-listing from the NZX or ASX.
3 Things Markets Will be Watching this Week
- We move into the last US corporate profit announcements, with the level of the market making the current earnings season as important as ever.
- US Politics, with Tax Reform taking centre stage.
- Australian employment data is released on Thursday.
Have a Great Day,
Team
