Global markets were higher overnight as US and European stocks began the week strongly as investors bet monetary policy will remain easy as central bankers work to stoke economic growth. Tech stocks also rallied on the back of positive trade related comments made by Trump.
Once again, we believe markets are at an interesting juncture and that volatility is likely to remain elevated.
Stock in Focus: QBE Insurance (QBE:ASX)
QBE's first-half profit has risen 29% to $US479 million ($A709 million) after an average 4.7% increase in premiums helped lower the insurance giant's attritional claims ratio.
It was overall an in-line result, with the turnaround in QBE's underwriting profit exceeding expectations. Premium increases are offsetting claims inflation but it is unlikely premium rates can accelerate further from here and offset the large fall in yields globally – with lower investment income.
We have been positive on QBE as a turnaround story given the benefits of QBE’s simplified business and macro-factors moving in favour of QBE. However, given the global interest rate track has now flipped, QBE's investment income will no longer benefit from higher interest rates. In saying that, QBE also benefits from a falling Aussie Dollar which has been weakening significantly.
We currently have a BUY recommendation on QBE.
Members should look out for a full update on QBE to be released in tomorrow's weekly report.
Australia & New Zealand Market Movers
The Australian market started the week off on a positive note (ASX 200 index +0.97%) as Australian shares followed the lead of stocks in the US on Friday amid reassurances of extra stimulus from global central banks. The major banks led gains, with Macquarie also rising strongly.
In stock news, SmartGroup soared 21% after its half-year net profit excluding amortisation of $40.5 million beat market expectations. Lendlease shares rose 10% despite operating earnings dropping 30% to $1.25 billion. Investors were encouraged by the strong performance of the company's development business however, with Lendlease set to sell its underperforming engineering and services business. BlueScope Steel fell after flagging a weaker outlook for the first half of the new financial year.
The New Zealand market rebounded on Monday (NZX 50 index +0.44%) ahead of a flurry of company results this week from market heavyweights such as A2 Milk, Fletcher Building, Auckland Airport, Air NZ, and Spark. Z Energy fell ahead of today's release of a draft study into fuel pricing by the Commerce Commission. The transport fuels firm will hold a conference for investors later in the day.
3 Things Markets Will be Watching this Week
- Australasian earnings season gathers momentum this week with a number of major companies set to make profit announcements.
- Minutes from the Reserve Bank of Australia's latest meeting are released Tuesday.
- Minutes from the last US Federal Reserve Meeting are also published on Tuesday.
Have a Great Day,