Daily Market Insights
Global markets were mixed overnight in what was a quiet night in terms of news flow.
The US market continues to drift as it hovers near record highs. As we mentioned last week, global markets have been remarkably calm of late, with the VIX (a measure of the volatility of the US share market, namely the S&P 500 index) touching its lowest levels since 1993. What this means is open for debate, although there is no doubt that it is extremely rare for Wall Street to be as calm as it is right now.
Stock in Focus: Trustpower (TPW.NZ)
Shares in Trustpower have moved higher post its result last week as it lifted annual profit 37% as the electricity generator-retailer's earnings were bolstered by strong hydro production and favourable prices in Australia, and a full-year contribution from King Country Energy.
Net profit rose to $94m, or 29.6 cents per share, in the 12 months ended March 31 from $68.5m, or 21.7 cents, a year earlier, the Tauranga-based company said in a company. Trustpower carved out its Australian windfarms into separately listed Tilt Renewables, and the year-earlier figures have been adjusted to reflect the change.
The year was characterised by strong generation volumes, particularly in Australia where the increased volume was also associated with very high spot prices, chief executive Vince Hawksworth said. At the same time the retail division posted a 20% drop in operating earnings to $45m as margins were squeezed by increased competition. TPW also spent more to improve its level of service as it tries to build out its offering to include bundled telecommunication services.
We do not currently cover TPW, and have been buyers of Genesis Energy (GNE) as our preferred sector play.
In saying that, we are BUY rated on Infratil which owns a significant portion of TPW.
Australia & New Zealand Market Movers
The Australian share market was higher on Tuesday (ASX 200 index +0.21%) following a turnaround in investor sentiment towards the big banks. A pick up in the price of crude oil saw investors support the resource sector, with stocks such as BHP Billiton moving higher. Recent data is showing that hedge funds are giving up on the Aussie dollar, with net long positions cut for the 6th straight week as a falling iron ore price has been the main driver of weakness in the AUD.
Yesterday also saw the release of minutes from the latest RBA meeting. Housing and jobs worries look to have kept the RBA on hold. A dim outlook for wages growth and continuing worries about households overextending themselves to pay mortgages were key factors that convinced the Reserve Bank of Australia to leave official interest rates on hold in May.
The New Zealand market continued to retrace yesterday (NZX 50 index -0.3%) led by companies that have outperformed the overall NZX market this year, as investors took profits from Heartland Bank and Chorus. In terms of economic news, Crown-owned housing agency, Housing New Zealand, has said it will build a net 17,207 new affordable homes over the next decade in the government's biggest new state housing announcement in more than eight years in government.
3 Things Markets Will be Watching this Week
1. The Reserve Bank of Australia releases minutes from its last meeting on Tuesday.
2. Australian employment data is released Thursday
3. NZ retail sales data is published Monday.
Have a Great Day,
Team
