Global markets continued to trend higher overnight, with the US market (S&P 500) hovering near record levels. Wall Street was lifted by gains in bank and technology shares, with a strong second-quarter earnings season fuelling optimism about the strength in the U.S. economy.
In major stock news, Elon Musk stated he is considering taking Tesla private at $420 per share, in what would be the largest deal of its type at approximately $71bn.
Closer to home, the Reserve Bank of Australia (RBA) once again kept interest rates on hold at the record low 1.50% level, marking two years since it last moved interest rates. The RBA said it continued to believe the next move in the cash rate was more likely to be an increase rather than a decrease, adding that the return of inflation to the mid-point of its 2-3 per cent target range to be "gradual".
Stock on Focus: Summerset (SUM:NZ / SNZ:AX)
Summerset was the best NZX performer yesterday as it announced it has purchased land (8.1 hectare property) to develop its second New Plymouth retirement village.
Summerset said it remains on track to build 450 retirements units across its New Zealand villages this year. Summerset currently has 23 villages completed or in development across the country, housing more than 5,000 residents. Summerset Chief Julian Cook said “The new village will help to provide for the expected 37 percent increase in people aged over 75 in the New Plymouth area within the next decade”, as the baby boomer generation enter retirement.
There has been a lot of media attention around issues in the construction sector of late, with companies facing difficulties in the face of rising costs. We would note that we believe retirement villages such as Summerset have an advantage in that they have in-house construction teams, which can enable them to better control costs.
We currently have a HOLD rating on Summerset.
Australia & New Zealand Market Movers
The Australian share market slipped on Tuesday (ASX 200 index -0.30%) as falling metals prices put pressure on the materials sector. Industrial metals fell as investors trade defensively after China released a list of $US60 billion worth of US imports it would apply tariffs to if the US went ahead with its tariff plans. In stock news, Amcor shares fell after the world's biggest listed packaging company said it will buy US-based competitor Bemis in a $9.2 billion deal.
The New Zealand market retraced yesterday (NZX 50 index -0.31%) led lower by ongoing weakness in Pushpay shares and as construction sector fears weighed on Fletcher Building. On the flipside Summerset made gains. Fletcher Building fell on reports that government policymakers continue to grapple with skinny margins in the wider construction sector. Steel & Tube, whose shares have lost almost a third of their value this year, announced plans to raise about $80.9 million at a steep discount to repay debt and strengthen its balance sheet as it restructures its business under new management.
3 Things Markets Will be Watching this Week
1. US corporate earnings season continues as investors digest quarterly company profit announcements.
2. Locally, investors in Australia and NZ will have a number of profit announcements to focus on as earnings season gets busier.
3. The Reserve Bank of Australia makes an interest rate decision on Tuesday, the RBNZ also makes a decision on Thursday.
Have a Great Day,
Team