Global markets sold off overnight, with stocks on Wall Street experiencing the biggest drop in about 4-months, falling from record highs.
The sell-off was driven by US Treasury yields surging to multi-year highs on robust economic data and upbeat comments from the US Federal Reserve. As we have discussed in the past, the pace of interest rate moves higher will be a key factor in terms of driving markets, given the importance of interest rates for driving economic growth and influencing valuations.
Stocks most sensitive to higher rates include utilities, and we have highlighted in the past that is a reason we are cautious on the NZ power generators (given higher rates reduce the attractiveness of their dividend yields).
Stock in Focus: Bank of Queensland (BOQ:AX)
The Aussie Banks and Financials rallied yesterday, with Bank of Queensland (BOQ) leading gains across the banking stocks as it released its full year result.
While its full-year cash profit declined, the regional lender reported a cash earnings per share of 94.7¢, ahead of consensus expectations of 90¢. Looking at some of the other detail, BOQ’s important net interest margin increased 5 basis points to 1.98%, with its fully franked final dividend flat at 38 cents per share.
BOQ’s chief executive officer, Jon Sutton, said that “BOQ has transformed into a resilient, multi-channel business that is geographically diverse and serves a broader range of customers. This is a result of the clear and consistent strategy we have been implementing”. This strategy has seen its Business division become its biggest contributor to earnings by some distance.
Overall this looked like a solid result, particularly given the significant headwinds facing the sector.
We currently have a HOLD recommendation on BOQ.
Members should look out for a full update on BOQ to be released in next week’s weekly report.
Australia & New Zealand Market Movers
The Australian share market was higher yesterday (ASX 200 index +0.49%) led by stocks exposed to rising alumina prices as the world's largest refinery shut down production indefinitely. In stock news, Magellan Financial Group shares closed sharply higher after it announced co-founder Hamish Douglass would be stepping down from his role as chief executive to become the company's chairman, switching roles with current chairman Brett Cairns. The company also reported its assets under management had declined slightly through September, falling from $74.6 billion to $74.5 billion.
The New Zealand market sold off on Thursday (NZX 50 index -0.40%) for a fourth day as A2 Milk remains out of favour after recent selling by its chief executive and a director. Genesis Energy and Auckland International Airport also declined after shedding rights to dividend payments. In stock news, Summerset shares fell after reporting a decline in third-quarter sales. The retirement village operator expects sales to recover in the fourth quarter as new units come on stream.
3 Things Markets Will be Watching this Week
1. Trade related news-flow is likely to continue to feature in headlines.
2. The Reserve Bank of Australia makes an interest rate decision on Tuesday.
3. Important monthly US employment data (payrolls) is published on Friday.
Have a Great Day