Global markets continued their rout overnight, experiencing the worst day for the US Technology sector since 2011, with the Nasdaq plummeting -4.4%. The US market, measured by the S&P 500 index is now virtually flat for 2018.
October continues to be a brutal month, as weak forecasts from chipmakers yesterday fanned concerns over the impact of tariffs and China’s slowdown on corporate profits, even though Boeing hiked its outlook. On a more positive note, there were some better than expected results after hours, with Tesla shares jumping sharply this morning.
There does not seem to be a single catalyst for the sell-off, but a number of concerns worrying investors. Rising interest rates, impacts of trade tensions and Chinese growth, to Italy's budget concerns and the upcoming US mid-term elections all have investors on the defensive.
Stock in Focus: DELEGAT GROUP (DGL:NZ)
Shares in New Zealand’s largest listed winemaker Delegat Group reached record highs after delivering another record result for the 2018 financial year. The market was also upbeat on their guidance with global case sales volume expected to increase to 3.38m by 2021 financial year. However, soon after the announcement its shares were hit heavily with other growth stocks in the recent market pullback.
We are not concerned by what we view as a healthy pullback given a strong run. DGL’s result was driven by increasing scale and favourable pricing widening margins. DGL expects global case sales to grow 7% compounded over the next three years, with the growth supported by a record harvest for 2018. We are positive on DGL given its solid operations and growth guidance, along with being a benefactor of a weakening NZD.
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Australia & New Zealand Market Movers
The Australian share market continued to move lower on Wednesday (ASX 200 index -0.24%) with lower commodity prices weighing on the miners and the ASX index. In stock news, Newcrest Mining’s gold production rose five per cent in the first quarter compared with a year ago, helped by higher output at its flagship Cadia mine. The country's largest independent gold miner said gold production for the quarter ended September 30 rose to 548,351 ounces from 522,917 ounces a year ago.
The New Zealand market was lower yesterday (NZX 50 index -0.36%), with the market experiencing losses for a fourth trading session, as Fletcher Building dropped to a six-month low and dairy companies A2 Milk and Synlait Milk remained under pressure. In stock news, NZME was unchanged after it gave up on a planned merger with rival Stuff. The media companies won't appeal the rejection of their merger to the Supreme Court.
3 Things Markets Will be Watching this Week
- US corporate earnings season for the 3rd quarter gets into full-swing with reports from Microsoft, Amazon and Alphabet due this week.
- Trade related news-flow is likely to continue to feature in headlines.
- The European Central Bank (ECB) makes an interest rate decision on Thursday & US GDP data is published at the end of the week.
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