Global markets recovered overnight, as shares on Wall Street rebounded by about 2%, with Tech stocks leading the charge as Microsoft and Tesla reported strong earnings figures.
It is shaping up to be the worst month for stocks since the global financial crisis. As we discussed yesterday, there does not seem to be a single catalyst for the sell-off, but a number of concerns worrying investors. Rising interest rates, impacts of trade tensions and Chinese growth, to Italy's budget concerns and the upcoming US mid-term elections all have investors on the defensive. We are clearly in the latter stages of what has been a long bull market, and volatility has returned to markets this month in a big way.
The rout on Wall Street spread into Asian markets yesterday, and Australian shares have wiped all their gains from the past 12 months, diving into a technical correction. We would expect to see a rebound across the local Aussie and Kiwi markets today, and believe it is important for medium-term investors to remain calm in volatile periods.
Stock in Focus: Tesla (TSLA:NASDAQ)
Tesla shares jumped +9% overnight after releasing a better than expected 3rd quarter profit which surprised the market.
It was a remarkable third quarter. Revenue surged by 70% for the quarter, and 128% year on year. Additionally, and unexpectedly for many, Tesla reported over $300 million in net income. The company greatly improved Model 3 production efficiency and cut costs substantially, and the Model 3 was by far the best-selling car in America. Tesla's overall gross margin surged from 15.4% to 22.3%.
From a big picture point of view, we have said that buyers of Tesla shares in essence need to believe in the Tesla story and Elon Musk. It is also a step-change to see the start of profitability.
We currently have a HOLD recommendation on Tesla.
Australia & New Zealand Market Movers
The Australian share market tanked yesterday (ASX 200 index -2.83%) as traders tracked a global sell-off, with financial services giant AMP plunging almost -25%. AMP, the Australian financial services firm said it will sell its AMP Life unit for A$3.3 billion and plans to spin out its New Zealand wealth management and advisor business as a separately listed company in an initial public offering. Lynas was the index's best performer, lifting +7.3% as the company’s quarterly updated showed cash flow from operating activities in the September quarter rose 57% on the June quarter and sales revenue rose 15.2%.
The New Zealand market was lower on Thursday (NZX 50 index -0.86%) as a rout on Wall Street spread into Asian markets, weighing heavily on growth stocks such as software firms Gentrack and Pushpay. New Zealand fared better than markets across Asia, although did fall for a 5th straight day. In stock news, Freightways fell with the market after the courier and information management firm said first-quarter revenue was up 8.3%. It also affirmed expectations for earnings growth.
3 Things Markets Will be Watching this Week
- US corporate earnings season for the 3rd quarter gets into full-swing with reports from Microsoft, Amazon and Alphabet due this week.
- Trade related news-flow is likely to continue to feature in headlines.
- The European Central Bank (ECB) makes an interest rate decision on Thursday & US GDP data is published at the end of the week.
Have a Great Day
