Global markets were slightly lower overnight, as investors await a number of key events this week.
Investors are keeping a close watch on headlines around US-China trade as planned US tariffs on Chinese imports kick in on Dec 15 (Saturday). The US Federal Reserve makes its last interest rate decision for the year Thursday morning (AU/NZ time). Finally, the UK election will be held on the 12th of December.
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Stock in Focus: A2 Milk (:NZX / A2M:ASX)
A2 Milk fell as much as 7% yesterday, but ended the day down 3% after chief executive Jayne Hrdlicka announced her exit from the firm after only a year and a half, citing too much travel for her to manage her other commitments.
Previous head Geoffrey Babidge, who oversaw the company’s transformation from a penny-dreadful to at times the country’s biggest listed company, has been appointed acting chief executive while a replacement is sought. The news came out of left-field, and there have been numerous press articles highlighting the key reason for the departure was the pace at which she was transforming the company at the expense of margins. A2 Chairman noted: “Like all strategies, like anything in life, the answer is always a good and fair balance. There is a balance of investment which we agree with as well as managing the profitability of the business”.
Importantly, management reiterated recent guidance and spoke about a 30% margin target medium term.
We do not see the news yesterday as material, and in fact do not mind the departure. We remain positive on the A2 story.
We currently have a BUY rating on A2.
Australia & New Zealand Market Movers
The Australian market started the week with gains (ASX 200 index +0.34%) following strong economic data from the United States.The key figure was the addition of 266,000 non-farm jobs, which was close to 50 per cent above the number of new jobs expected by the market. The broader resources sector also supported the local benchmark, led by the major mining companies.Lynas also added to the gains for the materials sector, as the rare earths producer rose after announcing it would build a new processing plant at Kalgoorlie in Western Australia. The need for a new cracking and leaching plant follows the order to remove that part of its operations from Malaysia, which had been the subject of controversy in the south-east Asian nation.
The New Zealand market was lower on Monday (NZX 50 index -0.41%) as A2 Milk shares weighed on the market. Chorus shares were also lower. The telecommunications network operator has been repairing damaged lines from the South Island flooding, which saw more than 3,000 customers lose broadband and phone services over the weekend. NZX posted the day’s biggest gain, as the stock market operator today said annual operating earnings will be at the top of guidance, reflecting increased capital raisings, one-off revenue from its data and insights business, and consulting revenue from energy contracts.
3 Things Markets Will be Watching this Week
- Tariff news, as planned tariffs by the US on Chinese imports kick in on Dec 15.
- The US Federal Reserve makes its last interest rate decision for the year Thursday morning (AU/NZ time).
- The UK election will be held on the 12th of December.
Have a Great Day,