US Market at All-Time High | Costa Hits a Speedbump

27 August 2018

Global markets rallied on Friday as the US market added to its longest bull-market run, closing above its previous January high.

Investor sentiment was supported by reassuring comments from Federal Reserve chairman Jerome Powell, who affirmed the US central bank's current pace of rate hikes. His comments did little to change market expectations of a rate hike in September and he said that there doesn't appear to be an "elevated risk of overheating" after discussing inflation trends.

Last week saw the Aussie political situation dominate headlines, and it is likely that attention shifts away from Australian politics and back to the global political stage.

It was a very busy week in terms of company announcements across Australia & NZ last week. We reiterate that we have been surprised by the large share price moves in both directions as the market looks to punish weak results while jumping on the back of positive news-flow. So far about 30% of companies on the ASX have reported earnings figures ahead of market estimates, with 23% missing, and the remainder in-line with expectations.

 

Stock on Focus: Costa Group (CGC:AX)
Star performer Costa Group saw its shares free-fall on Friday as Australia's leading producer in the fresh fruit and vegetables market released full year results which disappointed the market.

Looking at some of the detail, revenue was up +10.2% on last year with the company’s preferred measure of operating earnings growing by +30.9%. A strong performance from the company’s key Produce segment supported its revenue and profit growth. However, cold weather delayed its Moroccan crops and it experienced challenges in several aspects of the international business, including soft interest in China for Costa's raspberries and blackberries. 

We are not overly concerned with the pull-back as the stock had run up into the result, with the performance bar set high. For medium term investors we see Costa continuing to benefit from the constant and growing demand for food globally as well as being attractive to health conscience consumers. 

We currently have a BUY recommendation on Costa.

Members should look out for a full update on Costa to be released in our weekly report.

 

Australia & New Zealand Market Movers

The Australian share market was more or less flat on Friday (ASX 200 index +0.04%) as news that Scott Morrison would be the nation's new Prime Minister saw some certainty return to the market. That news wasn't enough to offset the losses made through the rest of the week, however, with the prospect of a change in government firmly in the minds of investors.
 

The New Zealand market was in positive territory on Friday (NZX 50 index +0.22%) as investors digested another busy day of company announcements.

Port of Tauranga was the standout performer as it posted a 13% rise in annual profit to $94.3 million, driven by record cargo volumes, and plans further capacity expansion. Sky Network Television shares fell as the pay-TV provider wrote down its value by $360 million, resulting in a $240.7 million annual loss. Excluding the write-down, underlying profit for the June year rose 2.6 percent as they did manage to slow the shrinkage of their client base somewhat. Infratil dipped even as chief executive Marko Bogoievski told the company's annual meeting in Wellington that earnings will likely be around the top end of prior guidance.  Metro Performance Glass dropped sharply as the company downgraded its earnings guidance at its annual shareholders' meeting due to weakness at its Australian division. 

 

3 Things Markets Will be Watching this Week

1.             Locally, investors in Australia and NZ will have a number of profit announcements to focus on as earnings season continues.

2.             It is likely that attention shifts away from Australian politics and back to the global political stage.

3.             US economic growth (GDP) data is released on Thursday, as well as core personal inflation figures.

 

Have a Great Day,

Team

Global markets rallied on Friday as the US market added to its longest bull-market run, closing above its previous January high. Investor sentiment was supported by reassuring comments from Federal Reserve chairman Jerome Powell, who affirmed the US cent

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