Global markets sold off overnight as President Donald Trump said the US plans to impose 25% tariffs on steel imports and 10% on aluminium, and expects to sign a formal order next week. The tariffs are seen as the trigger point for a potential global trade battle, particularly between the US and China.
US Federal Reserve chair Jerome Powell also made his second congressional testimony overnight, and reiterated he sees gradual interest rate hikes – as investors looked for clues on how quickly US interest rates will rise, which reduces the appeal of equities. The key question will be whether the Fed is correct in its forecasts and assumptions or potentially behind the curve in terms of inflation. In terms of US inflation data released overnight, it remained unchanged on a year-on-year basis, we are watching developments closely.
Stock in Focus: NZ King Salmon (NZK:NZ / NZK:AX)
Shares in New Zealand King Salmon were lower yesterday as the company said the "extraordinarily hot summer" has cut survival rates at its fish farms in the Marlborough Sounds and it expects weaker second-half earnings, after profit in the first half soared 81%.
Profit rose to $15.7 million in the six months ended Dec. 31 from $8.7 million a year earlier, the company said in a statement while sales climbed to $87.7 million from $63.6 million. Chair John Ryder said King Salmon remains "positive about the longer-term prospects for our company" having experienced strong demand for its fish in the first half.
While we do like the NZK business as a play on our “dining boom” investment theme, the recent result does highlight the risks such as weather which are inherent with agriculture stocks such as NZK.
We currently have a HOLD rating on NZK.
Members should look out for a full update on NZK to be released in an upcoming weekly report.
Australia & New Zealand Market Movers
The Australian share market fell on Thursday (ASX 200 index -0.71%) for the 2nd day in a row as persistent fears of a more aggressive US central bank reverberated around the region. Resources names in particular weighed as commodity prices wilted amid continuing fallout from Wednesday's disappointing read on Chinese industrial activity. In stock news, Donut King's embattled parent company Retail Food Group has been suspended from trade on the share market for failing to lodge its half-year financial report. RFG, which also owns Gloria Jean's, Crust Pizza and Michel's Patisserie, delayed the release of its results on Wednesday as it said it was waiting for its auditor to sign off on the report.
The New Zealand market lost ground yesterday (NZX 50 index -0.37%) as NZ shares joined a regionwide sell-off with Asian equity markets following Wall Street lower as global investors second-guess the outlook for US interest rates, and as local analysts absorb a "pretty good" earnings season. In stock news, Fletcher Building announced it was granted a waiver (for breach of debt covenants) by the US private placement noteholders after trading had closed Tower rose after the insurer's board said it will resume dividend payments in the 2018 financial year, having settled a dispute with reinsurer Peak Re
3 Things Markets Will be Watching this Week
1. Local AU/NZ companies continue to report profit figures as earnings season is likely to dominate news flow.
2. New US Federal Reserve Chair Jerome Powell makes a speech to US legislators this week.
3. Important US economic data is released on Thursday (AU/NZ time), including GDP and inflation figures.
Have a Great Day,
Team
