Week Ahead – Fed |​ Scales Update

17 June 2019

Global markets were lower on Friday as​ US​ investors await ​this​ week’s Federal Reserve meeting for signs of imminent easing, while the US-Iran confrontation in the Gulf of Oman added to geopolitical uncertainty, sending oil prices higher.

​While no policy change is expected this week, investors will be parsing the post-meeting statement and comments by chairman Jerome Powell for any guidance. Markets are already pricing in a 25bp rate cut in July. Our view is that this could be setting up for disappointment, as the US economy still looks to be holding up relatively well, in our view. 

Equity markets were mixed across Asia, as investors remained uncertain about the impact of the persistent trade dispute between the US and China​.​

Stock in Focus: Scales Corp (SCL:NZX)

​​​​​​​​​​​​​​​​​Agribusiness Scales released updated in line profit guidance at its AGM last week, reiterating operating earnings guidance at $49-$55m. This compares to $48.5 million in 2018 on a like-for-like basis.

Scales operate a portfolio of businesses that will directly benefit from improvements in New Zealand agricultural output. With a recent  focus  on  expanding  its  Food  Ingredients  business  to  offset  the sale  of  its cold store business, it will be interesting to see the direction in which management expand the business.

We are particularly positive on the potential upside from a growing appetite for NZ apples  from Asian consumers. Asian  consumers  appear  to  be  willing  to  pay  a premium for fresh apples given the high level of quality and colour that Scales can produce.
We currently have a ​BUY recommendation on​ Scales.
Members ​should look out for a full update on Scales to be released ​in this week's weekly report.

Australia & New Zealand Market Movers

​​​​​​​​​​​​​​​​​​​​​​​​​​​The Australian share market ​ended the week on a positive note (ASX 200 index ​+​0.​18​%)​ with the ​ASX end​ing the​ week at fresh 11-year high​. ​ The ​local market had a strong week as surging in iron ore prices bolstered mining stocks​. ​In stock news, ​Facebook is negotiating deals with Network Ten and Nine Entertainment to broadcast content on the social media giant after Seven West Media's studio arm agreed to put original digital series on the platform.

The New Zealand market ​was a touch higher on Friday (NZX 50 index +0.11%) ​w​ith blue-chips including Auckland International Airport and Ebos Group hitting new highs​. Summerset group fell in unusually busy trading which weighed on the retirement sector.


3 Things Markets Will be Watching this Week

  1. ​​​​​​Trade War headlines are likely to remain drivers of investor sentiment.
  2. On Tuesday, the Reserve Bank ​of Australia ​will release the minutes of its last meeting, when it cut interest rates.
  3. The ​key event to watch for the week will be the latest US Federal Reserve policy meeting with an announcement set for Thursday morning AU/NZ time.​

Have a Great Day,


Markets are already pricing in a 25bp rate cut in July. Our view is that this could be setting up for disappointment.

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