Global markets were once again in negative territory, as US stocks turned lower as Apple led a decline in technology stocks, offsetting early support from tame US inflation data and a stabilisation in oil prices. All three major US benchmarks did pare their losses in the final hour of the trading session.
The bounce global equity markets enjoyed earlier this month has proven “short-lived” and investors are likely to be wary ahead of the US-China trade talks at the G20 summit in Argentina.
As we have discussed previously, apart from the US-China situation, the other key risk for markets is sharply higher moves in US interest rates. On this front, we were relieved that inflation data overnight remained subdued. Overall market sentiment continues to be extremely cautious. Once again we reiterate that it is important for medium-term investors to remain calm during periods of heightened volatility.
Stock in Focus: EBOS (EBO:NZ / EBO:AX)
Pharmaceuticals and pet food company EBOS rose yesterday after the release of a well-received investor day.
The company told investors the 10,000 square-metre warehouse it opened in Brisbane last month may deliver similar productivity and cost improvements to the warehouse it opened in Victoria in2015. EBOS said that since it opened its new warehouse in Victoria, Australia in October 2015, its productivity has increased more than 50%. The company also hinted at potential acquisitions and other avenues for growth.
We have a positive view towards EBOS given our healthcare investment theme. One of the key parts of our investment thesis on EBOS is its managements proven track record of successful bolt-on acquisitions.
We are currently BUY rated on EBOS.
Australia & New Zealand Market Movers
The Australian share market was hammered again yesterday (ASX 200 index -1.74%) with commodity-related stocks suffering heavy losses on plunging oil prices, wiping $30.3 billion in stock value from the ASX board. OPEC warned of weaker demand ahead, sending the price of oil tumbling further just days after Saudi Arabia said it would cut production in order to keep prices high. In stock new, retirement communities’ company Aveo Group fell -9.8% after it told investors at its AGM the residential market had softened since August.
The New Zealand market fell again on Wednesday (NZX 50 index -0.38%), as a sharp drop in oil prices and doubts about the prospects for China-US talks weighed on sentiment in Asian markets. The biggest gainer in the local benchmark was global logistics firm Mainfreight, which rose 5%. The firm reported a better-than-expected 32% increase in first-half profit to $55.7 million. In other news, Infratil has extended its takeover offer for Tilt Renewables until the end of the month in a final attempt to garner the 90% stake it needs to compulsorily acquire the remaining shares.
3 Things Markets Will be Watching this Week
1. Trade relations between China and the US ahead of the G20 talks later this month.
2. The latest US inflation data will be published on Thursday morning AU/NZ time.
3. Aussie employment data is also released on Thursday.
Have a Great Day