Global markets recovered some of the losses from the prior session overnight with gains being led by technology and consumer discretionary stocks. Interestingly the US Tech giants such as Facebook, Apple, Amazon, and Google, have seen their share prices hold up better than the broader Tech sector.
A jump in the oil price also boosted the energy sector, with US crude back at $70 a barrel for the first time in 2-months. The United States is pushing countries to halt imports of Iranian oil from November, a senior State Department official said, and it will not grant any waivers to sanctions.
As we touched on yesterday, a global trade war driven by US protectionism is clearly a risk for global markets and we are watching developments closely. On this front an automotive trade group said overnight that a US threat to impose a tariff of up to 25% on imported passenger vehicles under national security grounds would cost American consumers $45 billion annually, or $5,800 per vehicle.
Stock in Focus: Caltex (CTX:AX)
After being stuck in a downtrend for most of this year shares in Caltex have bounced back after releasing a well-received profit guidance update. Caltex operates in an industry perceived to be dying, with vehicles becoming ever more fuel-efficient, and with cheap battery power just around the corner. We have highlighted in our reports that we believe this creates massive long-term uncertainties for Caltex (as well as Z Energy in NZ).
In saying that, in the near term it appears Caltex is trying to shift its focus and capital to where it can best create value – with its fuel retailing assets. Management are contemplating an asset ownership restructure and selling the retail properties into a property trust. This change in strategy combined with the profit upgrade has seen buying support for the stock and a share price recovery.
Earlier this month Caltex said expects first-half underlying profit to improve by as much as 7%, with strong wholesale performance helping to offset lower retail fuel margins and the overhaul of its convenience store network. Net profit excluding the impact of oil prices on stockpiles should climb to between $295 million and $315 million, from $294 million a year earlier, according to recent guidance from the fuels refiner and convenience retailer.
We currently have HOLD rating on Caltex.
Members should look out for a full update on Caltex to be released in today’s weekly report.
Australia & New Zealand Market Movers
The Australian share market was lower yesterday following global moves (ASX 200 index -0.21%) with growth darlings such as Altium, Wisetech and Appen pulling back sharply. Shares in CBA were higher as analysts crunched the numbers on what a standalone CFS Group would be worth after Commonwealth Bank confirmed it will split from the wealth manager. Estimates are that a split off wealth management company could be worth $6.6 billion to $8.3 billion. In other news, JCDecaux and APN Outdoor have reached a $1.2 billion deal for the French out-of-home advertising giant to take over the Australian business at $6.70 per share.
The New Zealand market was in negative territory overall on Tuesday (NZX 50 index -0.07%) as heightened global trade tensions weighed across Asian equity markets. Losses were led by Pushpay and Trade Me, while Kathmandu continued to power higher after its positively received trading update. In stock news, Trade Me chief executive Jon Macdonald intends to step down in about six months, leaving a position he held for more than a decade and a company he joined in 2003. Interestingly Fletcher Building shares have continued to show strength, indicating the market has gained some comfort post the latest investor day.
3 Things Markets Will be Watching this Week
1. Investors will continue to watch for retaliatory trade tariff measures between the US and China.
2. The Reserve Bank of New Zealand makes an interest rate decision on Thursday morning.
3. US economic growth (GDP) and inflation data is published at the end of the week
Have a Great Day,
Team
