Global markets were mixed overnight, as US stocks fell in choppy trading as uncertainty over the outcome of a high-stakes meeting between the US and China at the upcoming G20 Summit kept investors on the side-lines.
As we have discussed, this weekend’s G20 meeting will be closely watched by investors. The US and China, looking to defuse tensions and boost markets, are exploring a trade deal in which Washington would suspend further tariffs through the spring in exchange for new talks looking at big changes in Chinese economic policy, according to the Wall Street Journal. President Trump himself sent mixed signals. "I think we're very close to doing something with China but I don't know that I want to do it," Trump told reporters as he left the White House to fly to the G20 summit in Buenos Aires.
Stock in Focus: Aristocrat (ALL:ASX)
Aristocrat Leisure shares were lower yesterday after the company announced its results for the year. While its net profit after tax and significant items of $729.6m was a 34% increase from the previous corresponding period, the result was below market expectations of $755m.
The result was driven by surging profits in its digital business, and a strong performance in North America. The miss on the profit line was mainly due to a 54% increase in design and development (D&D) to $414m. That said, Aristocrat will plough $100m into acquiring users across its booming digital business in the next 12 months, with chief executive Trevor Croker declaring he will not shy away from investing in marketing, design and development in a highly competitive market. "The other thing is we take a long-term focus and we've fully focused our investment in D&D and user acquisition, which are the two drivers for growth for our organisation” Croker said.
We continue to have a positive medium-term view on ALL who have been disciplined in their focus on growth which is now underpinned by expanding their digital content, technology and distribution channels. We like how the business transforms towards more online gaming, especially given the massive market opportunity.
We currently have a BUY recommendation on Aristocrat.
Australia & New Zealand Market Movers
The Australian share market rallied yesterday (ASX 200 index +0.56%) as global markets took their lead from dovish comments made by Federal Reserve chairman Jerome Powell. Local technology stocks were among the best performing on the market as Altium, Afterpay Touch, and Wisetech Global all rose strongly. In stock news, Mayne Pharma held its AGM and highlighted the strong start to the financial year, with group revenue up 21%. The company did not issue any comments on expectations for the full year however and its shares slipped -4%
The New Zealand market continued to trend higher on Thursday (NZX 50 index +0.93%) as NZ shares joined a global rally after Federal Reserve chair Jerome Powell indicated an early pause to higher interest rates, stoking demand for growth stocks such as Pushpay. In stock news, Air New Zealand increased as the airline carried more passengers in October. Gentrack sank after warning that Brexit had created uncertainty among the utilities software provider's customers. Pacific Edge rose to 40 cents after reporting increased sales and a smaller first-half loss. The bladder cancer test maker announced plans to raise another $12 million at 35 cents.
3 Things Markets Will be Watching this Week
- Trade relations between China and the US with the G20 summit talks at the end of the week.
- US Inflation and GDP data is published late in the week, with Fed Chair Jerome Powell also set to make a speech.
- The Reserve Bank of NZ releases its financial stability report on Wednesday.
Have a Great Day,