Global markets were higher on Friday as US stocks closed near record highs after the largest US bank, JPMorgan Chase, soothed worries that the first-quarter earnings season would dampen Wall Street’s recent rally.
During quarterly earnings season, the focus of investors usually shifts away from broader macroeconomic issues and back towards company profitability. The current earnings season is highly anticipated by markets, given expectations are for a fall in earnings generally, and the solid quarterly profit report from JPMorgan Chase opened the latest round of announcements. While it is very early days, the strong result is a good sign given JP Morgan's exposure to the broader US economy as America's largest bank.
Stock in Focus: Scales Corporation (SCL:NZX)
SCL shares have moved to new highs after releasing a solid 2018 result which met management expectations, with all business divisions performing well.
Underlying operating earnings of $64.7m was up +8% from last year, achieving the top end of guidance set in December for $59m to $65m. Scales announced the sale of their storage businesses Liqueo last year, while completing the sale of Polarcold as part of their strategy to be a pure agriculture play, and are awaiting approval from the Overseas Investment Office to allow the sale of its Polarcold business. Part of the proceeds are being used to expand their Food Ingredients division, by acquiring a 60% share in US based Shelby, with the goal to offset the earnings drop from the sale of their coldstore business.
While agribusinesses do come with associated risks – such as impacts from weather, currency moves, and commodity prices, we believe Scales offers an attractive risk reward opportunity to gain exposure to global agricultural trends.
We currently have a BUY recommendation on Scales.
Australia & New Zealand Market Movers
The Australian share market rallied on Friday (ASX 200 index +0.85%) as the equity market responded favourably to the European Central Bank and US Federal Reserve remaining patient on policy last week. The big banks provided most of the gains on Friday, while QBE Insurance rallied to near a 2-year high, with mining stocks the only sector in the red.
The New Zealand market was basically flat on Friday (NZX 50 index +0.02%) as retirement stocks Summerset Group and Metlifecare continued to recover from a sharp selloff. Air New Zealand and Tourism Holdings fell in the wake of weaker tourism numbers. Stats NZ figures showed visitor arrivals shrank in February from a year earlier, with a steep drop in Chinese tourists during the Lunar New Year.
3 Things Markets Will be Watching this Week
- The US first-quarter reporting season gets into full swing this week.
- Minutes from the last RBA meeting are released on Tuesday.
- Aussie employment figures are published Thursday, while NZ inflation data is released on Wednesday.
Have a Great Day,