Global markets were higher overnight as Wall Street hit new records, led higher by Tech Stocks and Financials.
A burst of investor optimism overnight has been fuelled by hints President Donald Trump may finally be making headway on long-promised tax cuts. US President Donald Trump and senior Republicans have settled on a bold and expensive tax cut plan to boost America's international competitiveness, which aims to slash the corporate rate to 20 per cent, offer full deductibility of business investment and eliminate the taxation of foreign profits. Such large tax reform will clearly be a massive stimulus for businesses and the US stock market, and we will be watching developments as they unfold closely.
Stock in Focus: QBE Insurance (QBE.AX)
Shares in insurance giant QBE came under more pressure yesterday as analysts fretted that mounting claims from a string of hurricanes in the Americas has the potential to overwhelm the insurer's reinsurance cover.
QBE has an annual ceiling of $2.05 billion in catastrophe cover, and hurricanes Harvey, Irma and Maria have contributed heavily to total claim costs which have been estimated by some at around $1.8bn so far in 2017. What this implies is that QBE's reinsurance cover will be sufficient, assuming there are no more large catastrophes this year.
As we have discussed in the past, QBE is one of the only Australasian listed company’s which benefits directly from higher US interest rates (as it improves QBE’s investment income), which we believe will be a key theme over the medium term.
We are currently BUY rated on QBE as a medium-term investment.
Australia & New Zealand Market Movers
The Australian share market was slightly lower yesterday (ASX 200 index -0.12%) after initially rising as heavyweights QBE and Telstra weighed on the broader market. Energy names adding to a strong showing on Tuesday following a move higher in the oil price.
In stock moves, Myer Holding surged 7 per cent even as it traded without rights to its latest dividend pay-out after Solomon Lew's Premier Investments, which owns a 10.8 per cent stake in the struggling department store, said it has requested a copy of Myer's shareholder register and said he wants a seat at the board (which likely reignited speculation that a takeover offer may be back on the cards).
The New Zealand market was made gains on Wednesday (NZX 50 index +0.34%) despite a lack of corporate news flow. Standout performers were Tourism Holdings, Synlait Milk, and Kathmandu Holdings gaining +5%, +3.7% and +2.6% respectively. On the flipside shares in Sky TV continue to come under pressure.
3 Things Markets Will be Watching this Week
1. The Reserve Bank of New Zealand makes an interest rate decision on Thursday.
2. The Geopolitical situation as tensions between the US and North Korea remain very high.
3. NZ politics and negotiations as a coalition government is formed, as well as the outcome from the German election.
Have a Great Day,
Team