Global markets rallied on Friday, led by a 13% surge in Amazon, in the process making founder Jeff Bezos the world's richest person at $US93.8 billion – more than $US5 billion clear of Bill Gates. It wasn’t only strong earnings which supported the US market on Friday, with US GDP data showing the economy expanded at a better-than-expected 3% annualised pace in the September quarter.
For the week ahead, there are a number of things to watch. The first is President Donald Trump's decision on who will be the next Federal Reserve chair, which could be made as early as today. The Fed is also set to hold a policy meeting this week, with market expectations for the next rate hike to come in December.
Further, quarterly earnings announcements will be watched closely after the strong results from Amazon, Alphabet, Microsoft and Intel on Friday. Given the high level of the market the current US earnings season as important as ever in terms of supporting company share price valuations.
Stock in Focus: Macquarie (MQG:AX)
While the broader Australian market was lower on Friday, shares in Macquarie hit a record high after the investment bank released its half year result.
MQG reported net profit of $1.25 billion for the half-year period ending September 30, 2017. The group also lifted its interim dividend 8% to $2.05 per share on total earnings per share of $3.70. Total revenues were up 3% to $5,937 million for the period. The board has also approved a $1 billion on-market share buyback depending on market conditions and the bank’s other capital management or investment requirements.
The group’s core asset management business of Macquarie Asset Management (MAM) was once again the dominant performer. However, the capital markets facing investment banking, trading, and advisory businesses saw profit drop steeply.
In terms of outlook, Macquarie reiterated that it is forecasting total profit to now be “slightly up” on the 2017 financial year. While MQG’s profitability is influenced by volatile factors such as equity market conditions and exchange rate moves, this was a solid result.
We are currently BUY rated on MQG.
Members should look out for a full update on MQG to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market sold off on Friday (ASX 200 index -0.22%), turning lower in the afternoon after the government lost its one seat majority as investors fretted about the potential impact of rising political uncertainty on the share market. Investors had been on track to enjoy another week of gains, with appetite for Macquarie Bank boosting the index in the early part of the day.
The New Zealand market dipped on Friday (NZX 50 index -0.02%) dragged lower by Fletcher Building for a third day running, while exporters Comvita and A2 Milk continued to make gains. Weakness in the kiwi dollar drove stocks such as export stocks last week as the NZ dollar hit a 1-year low.
3 Things Markets Will be Watching this Week
1. Quarterly US corporate profit announcements, with the level of the market making the current earnings season as important as ever.
2. The US Federal Reserve has a meeting this week and Donald Trump is expected to make a decision as to who is the next Fed Chair.
3. Monthly US employment data is released at the end of the week.
Have a Great Day,
Team