Global markets rebounded overnight as Wall Street rallied with a bounce in oil prices lifting energy stocks, while easing concerns around Italian political turmoil also added to positive sentiment.
The sell-off sparked by Italy's political crisis has faded, at least for the moment. As we discussed yesterday investors are concerned that the potential for new elections could see anti-establishment parties win more support, which renews the risk of a Eurozone break up. The latest news out of Rome is that the interim Prime Minister Carlo Cottarelli is leaving open the door for a eurosceptic government to be formed, thus avoiding the need for fresh elections. Key to that outcome was a decision by 81-year-old eurosceptic economist Paolo Savona to withdraw from consideration as the nation's next finance minister.
Stock in Focus: Fisher & Paykel Healthcare (FPH:NZ / FPH:AX)
Fisher & Paykel Healthcare (FPH) released their annual profit figures for the 2018 year earlier this week, and it was another solid set of numbers. We have been long-time supporters of FPH as a solid medium-term healthcare investment, and it has been one of our initial buy recommendations since September 2015.
Looking at the numbers, FPH’s 2018 annual profit was at the top end of its forecast range and it expects record earnings in the coming year as it benefits from growing global demand. Profit rose 12% to $190.2 million and management forecast 2019 annual operating revenue of about $1.05 billion and profit of about $210 million. While these were good looking numbers, the share price reaction was muted as it appears the market was expecting a little more.
We currently have a BUY recommendation on FPH.
Members should look out for a full update on FPH to be released in next week’s weekly report.
Australia & New Zealand Market Movers
The Australian share market sold off on Wednesday (ASX 200 index -0.48%) as the ASX followed a sell-off in global markets. The financial sector led losses with most of the Banks coming under significant selling pressure, while the oil price retracement continued to weigh on the resource sector. In stock news, ANZ is progressing with its divestment plans, offloading a New Zealand insurance business to specialist insurance group Cigna for $A644.8 million. Beaten up Retail Food Group advanced for a second day in a row following the appointment if a new CEO Richard Hinson.
The New Zealand market was in positive territory yesterday (NZX 50 index +0.14%) as Auckland International Airport, Spark and Fisher & Paykel Healthcare supported the market. Buyers also returned to A2 Milk. In stock news, Gentrack posted an 80% gain in first-half earnings on returns from new projects and acquisitions made last year and said it had a strong pipeline of opportunities. Despite the numbers shares in the utilities software developer fell as earnings growth disappointed the market as investors were looking for more. Green Cross Health was unchanged as the medical services provider reported a 15% fall in annual profit as it made up the unfunded shortfall left in the government's $2 billion pay equity package for aged and residential care workers, overshadowing underlying earnings growth.
3 Things Markets Will be Watching this Week
1. Geopolitics will likely remain a focus for investors – with trade talks between the US & China, and the between the US, Canada, and Mexico continuing.
2. The Reserve Bank of New Zealand releases its latest financial stability report on Wednesday.
3. Important US inflation data and monthly employment figures are published at the end of the week.
Have a Great Day,
Team
