Global markets were mixed on Friday, although Wall Street was slightly higher, as the major US indices experienced a 5th straight week of gains.
The bull market's upward momentum remains intact for now, helped by increasing signs that the global economy is expanding in a harmonised way, while volatility remains remarkably low.
As we touched on last week, in the US we have begun the quarterly earnings season. During earnings season investor attention usually shifts back towards company profitability. This high level of the market makes the current earnings season as important as ever (especially against the backdrop of rising interest rates which will not be supportive for valuations) and we will be watching developments closely.
Closer to home the ASX had its strongest week since March last week, and the NZX made gains despite the lack of government (although most of the gains were driven by momentum across 3 stocks: Xero, A2 Milk, and Fisher & Paykel Healthcare).
Stock in Focus: Infratil (IFT:NZ / IFT:AX)
Shares in investment company Infratil were higher as Trustpower raised its earnings guidance (Infratil holds a controlling interest of 50.7% of Trustpower).
Trustpower raised annual earnings guidance for a third time this financial year with strong wholesale electricity prices on both sides of the Tasman and increased generation in New Zealand. The company forecasts operating earnings to be between $255m and $270m in the year ending March 31, 2018.
Infratil now sees operating earnings of between $485m and $525m in the year ending March 31, 2018, up from a previous forecast of $460m-to-$500m. We are of the view that IFT offers relative value in what is an expensive NZ market.
We are currently BUY rated on Infratil.
Members should look out for a full update on IFT to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market continued to rally on Friday (ASX 200 index +0.34%) as Australian shares rallied to their best week since March, in a broad-based advance led by consumer discretionary and utility companies.
The New Zealand market was once again in positive territory on Friday (NZX 50 index +0.26%) as Xero and Fisher & Paykel Healthcare once again were the main supporters of the overall market index. Fisher & Paykel has said it is considering whether to appeal a ruling by the Regional Court in Munich that rival ResMed did not infringe its patents in one of the cases in the continuing intellectual property dispute over its face and nasal masks.
3 Things Markets Will be Watching this Week
1. Quarterly US corporate profit announcements, with the level of the market making the current earnings season as important as ever.
2. Australian employment data is published on Thursday.
3. Minutes from the last Reserve Bank of Australia meeting are released on Tuesday.
Have a Great Day,
Team