Global markets surged higher overnight after a raft of data bolstered confidence in the American economy and trade tensions eased.
China and the US have agreed to trade talks early next month. Optimism in Europe was also strong, as political rivals in Italy agreed to form a coalition government and the UK Parliament voted to prevent a no-deal Brexit. In the last couple of days we have seen the Hong Kong extradition bill withdrawn, Trump and the Chinese agreeing to resume trade negotiations; and the no-deal Brexit failing in Parliament – all being good news for stocks.
Today's stock market mover podcast discusses – The end of New Zealand Oil and Gas? Solution Dynamics and Metlifecare: to listen CLICK HERE.
Stock in Focus: Myer (MYR:ASX)
Shares in retailer Myer jumped +12% yesterday as Myer’s first increase in underlying earnings in nine years – albeit a paltry 2.2% rise to $32.5 million was a sign which encouraged the market that the business is in turnaround under John King who took the reins as CEO in June 2018.
The changes John King has driven have stabilised Myer and given it the best chance in a while to answer bigger questions about how it will evolve in the new retail environment which became progressively worse over the 12 months ended July.
Dumping unprofitable brands, ripping out costs, reducing inventory and convincing landlords to take back space that Myer no longer wants are all tactics designed to shrink the business back to a footprint appropriate to a modern retail landscape, where every consumer has a department store in their smartphone. On the other side of the ledger, investing to boost online sales and lifting sales of Myer’s home brands gives King the best chance of expanding both top line sales and bottom line profits. Encouragingly, net debt also fell $69 million to $39 million as free cashflow rose $22.8 million to $70.9 million and capex fell by $42 million to $45 million.
We currently have a HOLD recommendation on Myer.
Members should look out for a full update on Myer to be released in our weekly report
Australia & New Zealand Market Movers
The Australian market rallied yesterday (ASX 200 Index +0.92%) as the resumption of US-China trade talks and the return of some political certainty in overseas economies pushed local shares higher. Positive developments in the trade war will likely see a positive reaction across commodity prices, with miners Rio Tinto & Fortescue experiencing a strong session. Magellan Financial Group shares firmed after announcing it increased funds under management during August.
The New Zealand market continued to power higher on Thursday (NZX 50 Index +0.90%) with the index hitting new record highs as the low interest rate outlook continues to boost the allure of firms paying reliable dividends, such as property investors and power companies. A weaker currency is also providing support for exporters & offshore earners. A2 Milk, Scales Corp, Fisher & Paykel Healthcare, and Vista Group all had another strong session. Sky TV shares were unchanged as the NZ Herald reported that the pay-TV operator will offer $400 million to secure the next five-year cycle for rugby rights.
3 Things Markets Will be Watching this Week
- Trade War related news-flow is likely to continue to feature in headlines.
- The Reserve Bank of Australia maker an interest rate decision on Tuesday.
- Escalating geopolitical tensions between Hong Kong & China & Brexit are also creating nervousness.
Have a Great Day,