Global markets were lower overnight as US markets sold-off with investors on the side-lines following a strong rally this year, awaiting fresh developments on trade.
Closer to home, yesterday saw Aussie economic growth (GDP) figures come in below market expectations. The Australian economy grew by just 0.2% in the fourth quarter of 2018, below expectations of a 0.3%. This increases the prospect of rate cuts by the RBA which saw the market rally. The disappointing GDP growth data means the Reserve Bank of Australia may have to reduce its expectations for Australia's economic growth in the next two years. The Australian dollar fell to a three-month low but the share market climbed to a six-month high as yield hunters dived into high-paying dividend stocks.
Stock in Focus: Invocare (IVC:ASX)
Funeral services company InvoCare has seen its shares surge almost +40% higher this year after difficult 2018. We are pleased with the moves given we have stuck with our belief in the business.
The recent jump came after its 2018 full year result, as despite reporting a -22.1% fall in operating earnings due to weak trading condition for most of the year, the market appeared please with management’s upbeat outlook for the 2019 financial year – with trading conditions improving and heading towards market normalisation.
Given Invocare’s recent acquisitions and heavy investment in rejuvenating existing sites they are well equipped with the capacity and facilities to meet growing demand and expand market share.
Our long-term investment thesis remains intact as we believe IVC is set to benefit from favourable demographics of an aging population resulting in higher death rates over time.
We currently have a BUY rating on Invocare.
Australia & New Zealand Market Movers
The Australian share market made gains yesterday (ASX 200 index +0.75%) with the ASX closing at a fresh six-month high despite fourth quarter GDP figures coming in below market expectations. Mining stocks rose across the board on the back of stronger metal prices. The big mover yesterday was Myer which saw its shares advance +11% after the beleaguered department store chain surpassed low expectations to deliver a 3.1% rise in underlying net profit for the first half, driven by slashing costs and discounts, and boosting sales of higher-margin private fashion labels.
The New Zealand market was slightly higher on Wednesday (NZX 50 index +0.16%) led by a rebound in Fonterra shares which were recently trading at all-time lows. Fonterra Shareholders' Fund shares were higher after a stronger than expected dairy auction was seen as an optimistic sign for the sector, despite the fact that it would add pressure to earnings.
3 Things Markets Will be Watching this Week
- The Reserve Bank of Australia makes an interest rate decision on Tuesday.
- The final few local companies report earnings this week, wrapping up the current earnings season.
- Important monthly US employment data is released at the end of the week.
Have a Great Day,
