Global markets tumbled overnight with US markets down circa -3%, the worst trading session so far in 2019. Market volatility has jumped in August with every trading day seeing at least a 1% movement in US markets.
Mounting signs of a global economic slowdown hammered stocks and drove demand for sovereign bonds to such an extent that shorter-term yields (2 year) rose above long rates (10 year) in the US for the first time since 2007. While this does not guarantee a recession, it is an indicator that the bond market is expecting a US recession.
Stock in Focus: CSL Limited (CSL:ASX)
CSL shares jumped to new all-time highs yesterday after the global biotech giant delivered another solid result for the 2019 financial year.
Reported net profit after tax (NPAT) was US$1.919 billion which was up +17%, on the back of +11% revenue growth (under constant currency), while reported growth rates were lower due to unfavourable currency movements. The result was driven by solid growth from its core immunoglobulin portfolio and seqirus influenza flu both performing well. Earnings (EBIT) grew at a slower rate, as CSL ramped up research and development and increased operating expenditure to increase capacity and drive future demand to fuel further growth.
Pleasingly, management expects the solid growth to continue in the 2020 financial year and has provided net profit after tax growth guidance of +7% to +10%. CSL continues to be a star performer, being one of our best performing picks in our Australian portfolio while also having characteristics of a defensive healthcare business.
We currently have a BUY recommendation on CSL.
Members should look out for a full update on CSL to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian market was higher on Wednesday (ASX 200 index +0.42%) as a temporary relief from the global trade and positive domestic earnings pushed the market into the green. The major miners firmed on Wednesday as iron ore prices rose on the back of the Trump administration’s tariff relief announcement. Aveo Group shares rose +5% after the company accepted a $1.3 billion takeover offer from Canadian private equity giant Brookfield. The deal is worth $2.195 per security.
The New Zealand market was a touch lower yesterday (NZX 50 index -0.05%) as the local reporting season continued to meet expectations with SkyCity Entertainment Group posting a small increase in underlying earnings and signalling growth in the current year.The casino operator reported a 1.9% lift in normalised earnings, which smooths out the impact of big wins by its high rollers.
3 Things Markets Will be Watching this Week
- Australasian earnings season kicks into full gear this week with a number of companies set to make profit announcements.
- Employment data in Australia will be released on Thursday.
- US inflation data is published Wednesday morning NZ/AU time.
Have a Great Day,