Global markets were little changed overnight with US stocks holding near highs as optimism over the US-China trade truce faded after the United States threatened tariffs on additional European goods.
The big news yesterday was that the Reserve Bank of Australia has cut the cash rate to a new record low of 1.00% and left the door open for another cut before Christmas, if its second straight monthly reduction fails to boost the economy. The move was largely expected by the market.
Stock in Focus: Sydney Airport (SYD:ASX)
SYD shares have been on a strong run since the start of the year as it attracted income seeking investors in a low interest rate environment. There is talk that the tourism boom may be over, however the latest data was positive.
SYD released its traffic update for May and while domestic numbers were basically flat (+0.3% on last year), international traveller numbers were up +6.3% to 1.3 million passengers for the month. We remain positive on tourism as a key investment theme given the increased affordability of travel relative to income, and tailwind of a growing Asian middle class which is set to spend more on travel over the medium term.
We currently have a BUY recommendation on SYD.
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Australia & New Zealand Market Movers
The Australian share market was a touch higher yesterday (ASX 200 index +0.08%). The local sharemarket had been trading firmly higher through the day and initially jumped after the RBA cut rates to a fresh record low, but investors later fled the major banks over fears their margins would be squeezed after the Reserve Bank of Australia cut. The major miners led the market gains for a second session after the price of iron ore soared above $US120 a tonne.
The New Zealand market rallied on Tuesday (NZX 50 index +0.64%) as lower interest rates across the Tasman and cooling trade tensions between the US and China buoyed investor sentiment, underpinning demand for yield stocks such as Property For Industry and Contact Energy. Fletcher Building led the market higher as government data showed new house building permits bounced back in May.
3 Things Markets Will be Watching this Week
- Trade related news flow is likely to remain in the headlines.
- The Reserve Bank of Australia makes an interest rate decision on Tuesday.
- Friday's US nonfarm payrolls (employment figures) will be the key event in terms of economic data.
Have a Great Day,