Global markets sold off overnight as there was no relief for shares on Wall Street, with Tech stocks once again leading losses at the start of the final full trading week of 2018.
President Donald Trump once again criticised the Federal Reserve for its current series of interest-rate increases, days before the US central bank is expected to hike up interest rates again.
Closer to home, the Australian federal government's mid-year economic and fiscal outlook (MYEFO) published on Monday showed the government will unveil about $9 billion of additional tax cuts between now and next year's election, and still achieve the narrowest cash deficit since the global financial crisis. A surge in mining industry profits and tax revenue have boosted Commonwealth coffers and allowed the Federal Government to forecast a bigger-than-expected surplus next year.
Stock in Focus: BHP Billiton (BHP:ASX)
Shares in mining major BHP led the ASX higher yesterday as it announced it had successfully completed its off-market tender buy-back and said the board had determined to pay a special dividend of $US1.02 ($1.42) per share to all shareholders on January 30.
BHP will issue a special dividend for shareholders after selling its US shale assets. The world's biggest miner recently sold its US shale oil and gas operations to British giant BP for US$10.5 billion, and said it would return the funds to shareholders.
We have been positive on BHP for some time now as our top mining sector pick, particularly given its diverse production base and as a late cycle play – given commodity prices usually rise with inflation late in the economic cycle.
We currently have a BUY rating on BHP as it remains our top mining exposure stock.
Australia & New Zealand Market Movers
The Australian share market rallied yesterday (ASX 200 index +1.00%) on the prospect of additional tax concessions from the government in the next few months. In stock news, Lynas Corp shares advanced on Monday after the company sought to clarify reports in Malaysian media regarding the export of water leach purification (WLP) residue. The rare earths miner denied quoting estimates for the cost of exporting WLP residue and said its licence agreement stipulated WPL residue would only need be exported as a last resort solution.
The New Zealand market started the week in positive territory (NZX 50 index +0.26%) with Fisher & Paykel Healthcare leading the market higher. The late rally offset the negative tone for licensed lenders after the Reserve Bank's proposals to make them hold more capital on their books (which would likely mean the banks increase lending rates). Shares of Heartland Bank were hit particularly hard. In other news, Ngāi Tahu Capital took a direct stake in rural services firm PGG Wrightson, ending its joint venture with Agria and Chinese agribusiness New Hope International.
3 Things Markets Will be Watching this Week
- Tensions between the US & China following the arrest of Huawei’s chief financial officer will likely dominate headlines.
- The US Federal Reserve makes its final interest rate decision for the year Thursday morning (AU/NZ time).
- NZ economic growth (GDP) figures and Australian employment data is also published Thursday.
Have a Great Day,