Global markets were marginally higher on Friday as a tepid US jobs report kept expectations muted for another interest rate hike this year, but were still strong enough not to cause concerns about growth. US job growth slowed more than expected in August after two straight months of hefty increases as the Labour Department said 156,000 jobs were added last month, while economists had forecast an increase of 180,000.
Stock markets, in particularly the US market have been extremely calm this year. The US market (measured by the S&P 500 index) has not deviated from a technical level known as the 50-day moving average for 17 straight days, tying the longest streak since 1995. It appears that in August there was nothing new to drive the market upwards, but also no vivid reason to sell, leaving many investors looking for a catalyst to act.
Stock in Focus: Next DC (NXT:AX)
As we touched on last week, shares in data centre business Next DC jumped +7% after the company released its full year profit results.
Looking at some of the details, revenue increased 33% to $123.6 million while operating earnings rose 77% to $49 million. Strong performance was driven by a significant increase in contracted utilisation as a result of strong demand and an expansion in capacity. For the year ahead, Next DC has provided conservative guidance for operating earnings to be in the range of $56 million to $61 million. Next DC also plans to open three new facilities as it sees robust demand growth from customers.
We have recently initiated coverage on Next DC and see it as a very attractive growth investment, especially given it is one of the only ways in Australia/NZ to play the explosion of data investment theme.
We are currently BUY rated on Next DC.
Members should look out for our full update on Next DC to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market was slightly higher on Friday (ASX 200 index +0.18%) with a retreat in financial heavyweight Commonwealth Bank weighing on the index and blood products and vaccines giant CSL providing some lift. The Commonwealth Bank has responded to revelations it failed to monitor transactions in the USA, Asia and Europe. An internal review of the bank’s compliance with Australian and global anti-money laundering and counter terrorism laws reportedly showed large-scale failures in transaction monitoring across a multitude of businesses around the world.
The New Zealand market was a touch higher on Friday (NZX 50 index +0.06%) with A2 Milk Co and Fisher & Paykel Healthcare gaining, while blue-chips Auckland International Airport and Spark New Zealand declined. Several commentators expect the market may be quiet over the next few weeks ahead of the general election on September 23, with the most recent poll showing Labour ahead of National for the first time in ten years.
3 Things Markets Will be Watching this Week
1. The Reserve Bank of Australia makes an interest rate decision on Tuesday.
2. Australian economic growth (GDP) data is set to be released on Wednesday.
3. US politics as investors are concerned around the Trump Administration’s ability to pursue its pro-growth agenda.
Have a Great Day,
Team