Global markets retraced overnight with Facebook leading a decline in the US technology sector, as shares on Wall Street started September lower.
Closer to home, yesterday saw the Reserve Bank of Australia (RBA) keep its benchmark rate on hold for a 25th month. The RBA did not opt for a more dovish tone, despite Westpac Banking Corp's out-of-cycle rate hike and some recent weakness in the economy. The Aussie dollar climbed on the back of the RBA's statement.
In NZ, interestingly traders are now pricing in a 50% chance New Zealand's Reserve Bank will cut the official cash rate in an effort to lift inflation.
Stock on Focus: Spark (SPK:NZ / SPK:AX)
Shares in Telco Spark have rallied back up to the $4 per share mark yesterday, helped by news of competitor Vodafone New Zealand reporting a decline in annual earnings as its margins were squeezed by an increasingly competitive broadband market.
We have been vocal supporters of Spark as the Telco continues to transform itself into more of a digital services business. Spark continue to be proactive with new investments such as buying the Rugby World Cup rights, and while there may be some execution risks with their strategy, investors also receive an attractive dividend yield.
In terms of their recent profit result, Spark reported a -7.9% decline in annual profit to $385 million, although this was well flagged to the market as it booked restructuring costs on its efforts to become the lowest cost operator through its 'Quantum Programme'.
We are currently have a BUY recommendation on Spark.
Members should look out for a full update on Spark to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market continued to retrace yesterday (ASX 200 index -0.28%). The major banks weighed on the market index with the corporate regulator (Australian Prudential Regulation Authority) saying it expected the banks to do better in the future when it came to regaining trust. Westpac will pay a record $35 million fine for failing to properly assess whether thousands of people could afford to repay their home loans.
In other stock news, Evolution Mining released an encouraging three-year outlook for the company at its investor day, as despite rising cost pressures from higher energy bills and higher worker pay, the company believes it can keep its costs consistent over the next three years.
The New Zealand market was higher on Tuesday (NZX 50 index +0.38%) as investors weighed up the prospect of a potential rate cut, spurring demand for stocks with high dividends. Sky Network Television, Spark New Zealand and Chorus gained. Low interest rates have been a long-standing support for the domestic market, where investors can find relatively stable and high dividend returns from the likes of utilities and property investment firms.
3 Things Markets Will be Watching this Week
1. Locally, investors in Australia and NZ will be watching for the last few company profit announcements as earnings season winds up.
2. The Reserve Bank of Australia makes an interest rate decision on Tuesday.
3. Important monthly US employment figures are released at the end of the week.
Have a Great Day,
Team