Global markets rebounded overnight, with shares on Wall Street swinging wildly through the session, as appears to be the new normal, before powering higher into the close. A bounce back in trade-sensitive chipmakers pushed US stocks higher after Washington cut off a Chinese semiconductor maker from its US suppliers.
The S&P is on pace for its biggest monthly percentage drop in more than eight years. As we discussed yesterday, there does not seem to be a single catalyst for the sell-off, but a number of concerns worrying investors. Rising interest rates, and impacts of trade tensions and Chinese growth are the two big risks for markets, in our view. Once again, we believe it is important for medium-term investors to remain calm in volatile periods.
Closer to home, both the ASX and NZX continued their relief rally yesterday, buoyed by US President Donald Trump's comments that a "great deal" with China may be forthcoming.
Stock in Focus: PGG Wrightson (PGW:NZX)
PGG Wrightson was unchanged after shareholders approved the sale of its seeds business at its annual meeting yesterday. We have been positive on PGW for some time now, as one of our preferred exposures to our “dining boom” investment theme given it is a diversified agri-business (we believe that a growing middle class in Asia will provide a multi-year demand tailwind for Australian and NZ agriculture stocks).
PGW shareholders have overwhelmingly backed a deal to sell its seeds unit for $434 million, which will potentially free up significant cash for a return to investors. A resolution approving the sale of the seeds division to Danish cooperative DLF Seeds passed with 96.9% support. The deal is still subject to conditions such as approval form the overseas investment office.
We are currently BUY rated on PGW.
Australia & New Zealand Market Movers
The Australian share market rallied again yesterday (ASX 200 index +1.34%), as the ASX delivered its biggest one-day gain since July 2017. There was broad strength across the financial sector, with the major Banks rallying. Macquarie Group, Suncorp Group, QBE Insurance, and Insurance Australia Group also finished the session strongly. There was also optimism across the major miners, and Rio's chief executive Jean-Sebastien Jacques challenged governments to accept more project risk if they wanted a greater share of wealth from the mining industry, at an International Mining and Resources Conference in Melbourne. Boral was among the biggest drags on the index after the company warned in a quarterly update that profits were below internal company targets for the first part of the financial year due to wet weather.
The New Zealand market was in positive territory on Tuesday (NZX 50 index +0.38%), buoyed by US President Donald Trump's comments that a "great deal" with China may be forthcoming. In stock news, Green Cross Health rose after announcing the appointment of Carter Holt Harvey exec Rachael Newfield as its new group CEO from January.
3 Things Markets Will be Watching this Week
1. US corporate earnings season for the 3rd quarter is underway, with a number of major companies set to report this week.
2. Trade related news-flow is likely to continue to feature in headlines, and important monthly US employment figures will be released at the end of the week.
3. Locally, in Australia some of the major Banks such as ANZ and Macquarie will be releasing updates.
Have a Great Day