Global markets were mixed on Friday, although the US market ended the week with gains on Friday as Wall Street hit new record highs.
Weakness in US inflation data published on Friday will be watched closely by the US Federal Reserve, which boosted investor sentiment, while a rise in the price of oil bolstered the energy sector. The market is now pricing in about a 48% chance of another interest rate hike by the US Federal Reserve in December.
As we have discussed last week, US earnings season has kicked off with early reactions being muted. JP Morgan and other major banks released quarterly results which beat the markets expectations, however the Financial sector weighed on the broader market as share prices were lower.
Stock in Focus: BHP Billiton (BHP.AX)
BHP Billiton has been in the headlines again as activist US hedge fund Elliot Associates (which own 4.1% of BHP’s London Listed shares) is urging BHP to carry out a number of structural changes to “improve shareholder value”. The latest news is that a number of large Australian shareholders also support changes, on the back of Elliot’s latest visits to Australia.
BHP has officially responded to the ideas, and overall believe that the significant costs of the proposed changes towards BHP as a whole, outweigh any potential benefits derived from the proposals. If BHP were to sell off its Petroleum division it would be a question of price in our view, and if there was significant premium paid.
We have been supporters of BHP for some time now and prefer BHP over other miners as a medium-term investment given BHP is highly diversified by region and commodity type.
We are currently BUY rated on BHP as our only mining holding in the Australian Model Portfolio. Members can login to read our latest reports on BHP.
Australia & New Zealand Market Movers
The Australian share market was higher again on Friday (ASX 200 index +0.49%) ending the week on a positive note, with gains across the board led by a resurgent energy sector. There was also solid buying across the Big Banks, which kept the market in positive territory.
The New Zealand market continued to rally on Friday (NZX 50 index +0.51%) with led by retirement stocks Metlifecare and Summerset Group Holdings, while NZX and Pushpay Holdings extended their gains. In stock news, Trustpower said it expects annual earnings at the top of its forecast range (of $215m – $235m) due to a jump in electricity generation volumes and higher wholesale prices in the June quarter.
3 Things Markets Will be Watching this Week
1. The US Corporate Earnings season will be centre stage
2. Minutes from the last Reserve Bank of Australia are released Tuesday
3. NZ inflation data is also published on Tuesday
Have a Great Day,
Team