Global markets were a touch lower overnight (with the US market S&P 500 Index -0.8%), as the technology sector continued to charge ahead while the rest of the market lagged – as investors start to take profit or question current market valuation given the economic outlook. There is also anticipation ahead of the US Federal Reserve's two-day meeting in regards to the central banks view on the health of the economy.
Interestingly, nearly 300 stocks in the S&P 500 index are now trading at prices that exceed their consensus analyst 12-month price targets, and we think that markets are pricing in a "near perfect" recovery, and not much downside risk at the current juncture.
Scales Corporation (SCL:NZX)
Diversified Agriculture business Scales Corporation (SCL) held their AGM yesterday where they left operating earnings guidance unchanged, and will pay shareholders a 219 cent per share dividend for the 2020 financial year.
Apple sales continued to trend inline with last year, as Scales were fortunate enough to be deemed an essential service and able to continue to operate. Covid-19 does however create a minor impact and uncertainty around their Food Ingredients and Logistics business. Scales are also redeveloping ~32ha of orchards to premium apple variety to meet growing export demand.
We remain BUY rated on Scales
Australia & New Zealand Market Movers
The Australian market rallied strongly on Tuesday (ASX200 +2.4%) as investors returned from a long holiday weekend in an upbeat mood, piling into the banking sector amid ongoing optimism around an economic recovery.
Wesfarmers shares were flat after announcing a surprisingly solid trading update for first 5 months of the calendar year(up to 31 May), which saw Bunnings stand out, growing its sales by +19.2% over the same corresponding period last year, with other businesses other than Target also reporting sales growth. The company has told its customer base that the price increases planned for July will be further delayed from the original March target
The New Zealand market was lower yesterday (NZX 50 Index -2%) giving back some of Monday's gains, with major exporters and market heavy weights A2 Milk and Fisher & Paykel Healthcare down as the kiwi dollar continued to strengthen. While optimism continued to flow through for stocks benefiting from change to level 1 lock down, such as Air New Zealand, Sky City and Sky TV.
Infratil entered into a trading halt before announcing it would raise up to $300 million of new equity. The funds will be used to help advance its growth plans and allow it to snap up opportunities it sees through the recession.
3 Things Markets Will be Watching this Week
- Once again, US-China trade tensions and covid-19 news-flow will remain top of mind.
- A decision by the US Federal Reserve will be made this week.
- Closer to home, Ryman Healthcare will release its full earnings on Friday while an AGM will be held by Stockland.
Have a Great Day,