Week Ahead – Fed Focus | Auckland Airport

27 November 2017

Global markets were mixed on Friday, although in the US in a half session on the post-Thanksgiving holiday known as Black Friday, technology and retail stocks led the S&P 500 and Nasdaq to record closing highs.

Strength in markets has been driven by economic and earnings growth, and importantly low inflation and still-accommodative monetary policy have created a breeding ground for equity returns. As we have discussed previously, looking forward we see interest rate moves by the Fed as critical to driving markets (as a “policy error” with rates rising too fast could cause a sell-off in markets). On this front, the US Senate Banking Committee holds a hearing on Tuesday to confirm the nomination of Jerome Powell to succeed Janet Yellen at the helm of the Federal Reserve, and his comments will be watched closely. 
 

Stock in Focus: Auckland Airport (AIA:NZ / AIA:NZ)

Shares in Auckland Airport were higher on Friday as it provided a monthly traffic update. Chinese visitor arrivals were up 10.7% in October compared to the same month in 2016, while international passengers were up 6.8%.

These were another positive set of traffic numbers, reinforcing the strength of the tourism boom across New Zealand (and Australia) which remains one of our top investment themes. In particular we forecast strong medium-term growth from China, and tourism numbers and traffic stats continue to support that trend, as shown by the latest AIA traffic stats above.

However, what has held us back on becoming more positive on AIA is valuation, and particularly given its large capital expenditure program, we have held the view that there are better value investments to focus on in order to gain exposure to the tourism thematic.

We are currently HOLD rated on AIA. Members should look out for a full update on AIA to be released in our weekly report.

Australia & New Zealand Market Movers

The Australian share market was slightly lower on Friday (ASX 200 index -0.06%) although a gathering recovery in resources stocks boosted by a jump in iron prices helped the ASX overcome selling in the major banks and left shares moderately higher over the week. In stock news, Woolworths said it will step up its online offerings as Amazon launches in Australia amid fears the nation's retail industry is set for a massive shake-up because of the arrival of the online behemoth.

The New Zealand market traded in positive territory on Friday (NZX 50 index +0.35%) as shares were mixed with Ryman Healthcare and Stride Property making gains while Port of Tauranga and A2 Milk Co declined. Kathmandu shares rose as the outdoor equipment retailer, which held its annual meeting on Friday, said this week that first-quarter earnings were up despite sales dipping as it widened margins by selling less discounted stock.

 

3 Things Markets Will be Watching this Week

1.                 The US Senate Banking Committee holds a hearing on Tuesday to confirm the nomination of Jerome Powell to succeed Janet Yellen.

2.                 US economic data – with GDP released Thursday and manufacturing data at the end of the week.

3.                 US Politics with Tax Reform taking centre stage.

Have a Great Day,

Team

Global markets were mixed on Friday, although in the US in a half session on the post-Thanksgiving holiday known as Black Friday, technology and retail stocks led the S&P 500 and Nasdaq to record closing highs.

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