Global markets continued to rally overnight as gains in technology and energy shares pushed Wall Street’s three main indexes to new record highs on hopes of a US-China trade deal.
While trade news-flow and global economic data trends will remain in focus for investors, markets are entering a traditionally buoyant period on a sound footing. Since 1950, November has been the strongest month of the year, averaging a return of 1.6% and experiencing gains 68% of the time. December isn't far behind, as the third best performing month, increasing on 74% of occasions for an average gain of 1.5%.
Stock in Focus: Westpac (WBC:ASX / WBC:NZX)
Continuing the theme of bank profit results, banks performed poorly yesterday as Westpac said that it would raise $2.5 billion in fresh equity capital, reported a 15% plunge in full-year net profit, and slashed its second-half dividend.
The equity raise is set to bolster its balance sheet as trans-Tasman regulators demand higher capital. The shares were halted from trade at $30 to allow for the capital raising. WBC is facing a range of headwinds in the year ahead including lower rates, subdued credit growth, and higher near-term costs. Westpac CEO Brian Hartzer called the year "disappointing" while highlighting that a weaker economy and record low interest rates. The New Zealand unit was one of the stronger performers, with a 1% drop in core earnings.
All the banking sector fell, with National Australia Bank falling the most on Monday. National Australia Bank's capital position is most closely aligned with Westpac's and investors are likely wondering if NAB will need to raise capital as well.
We currently have a HOLD rating on WBC.
Members should look out for a full update on WBC to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian market started the week on a positive note (+0.27%) although steep losses from the banking sector kept the advance in check, with mining stocks rallying. Data undershot forecasts in Australia, however, with monthly retail sales only managing to grow at half the expected rate in September. What it might be implying is another piece of evidence that savings are increasing as people are paying down debt.
The New Zealand market was higher on Monday (+0.38%) joining a rally across Asia as easing trade tensions between the US and China helped buoy investor sentiment. Fisher & Paykel Healthcare led gains on the NZX. Outside the benchmark index, Evolve Education said it has agreed to buy five childcare centres in Queensland and Victoria for A$7.7 million plus potential earn-outs. Retailer Briscoe Group said the final quarter of the year is looking positive after an increase in third-quarter sales.
3 Things Markets Will be Watching this Week
- US earnings season for the 3rd quarter continues this week.
- The Reserve Bank of Australia makes an interest rate decision on Tuesday.
- A string of China data points are set to be released at the start of the week.
Have a Great Day,
