Global markets were higher on Friday with the major US market indices little changed.
For the week ahead, the crisis situation in Turkey is likely to keep investors on edge as emerging markets remain under pressure. On the trade war front, there is some expectation of the US-China trade war easing with a planned meeting this week between US negotiators and a Chinese delegation. Both the US and China are set to impose further tariffs on each other this month.
The local earnings season took a bit of a breather on Friday ahead of heavy reporting days this week across Australia & NZ. There have been big moves in both directions, and some growth names which have disappointed in their result or future guidance have been hit hard with little room for disappointment. We expect more of the same this week and are watching company announcements closely.
Stock on Focus: Treasury Wine Estates (TWE:AX)
As we touched on last week, wine company TWE released another solid result which was pleasing to see given we reiterated our BUY on the share price fall earlier this year. We have been supporters of the company for some time now as a beneficiary of an evolving Chinese palette and it has been one of our top performing ASX stocks.
Looking at some of the detail, TWE continued to forecast strong growth for the company, saying it expects profits to rise by around 25% in the next financial year. For the year TWE reported net profit after tax of $360.3 million on net sales revenue of $2,429 billion. This was an increase of 33.9% and 1.1%, respectively on the prior corresponding period. The Asian segment was the star performer, while the US division was slightly disappointing.
The recent weakness and any further fall in the Aussie dollar should also act as a tailwind for TWE given the amount of wine TWE sells overseas.
We currently have a BUY recommendation on TWE.
Members should look out for a full update on TWE to be released in our weekly report.
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Australia & New Zealand Market Movers
The Australian share market ended in positive territory on Friday (ASX 200 index +0.17%) with the market making gains for the week on the strength of strong earnings results. The Australian dollar continues to fall, most recently as ongoing issues in emerging markets weigh on the currency. Several commentators highlight that the Aussie dollar could be hit by a further deterioration in sentiment towards China, emerging markets and risky assets in general.
The New Zealand market rallied on Friday (NZX 50 index +0.60%) in a quiet day in regards to the domestic corporate earnings season, with Skellerup Holdings extending yesterday's gain to break a new record. Blue chip stocks underpinned gains with big names such as Ryman Healthcare, Air New Zealand, Mainfreight, and Spark all in positive territory. In stock news, Mercury NZ announced a pilot subscription service letting people rent a range of electric vehicles on a monthly basis.
3 Things Markets Will be Watching this Week
1. Locally, investors in Australia and NZ will have a number of profit announcements to focus on as earnings season continues.
2. RBA Governor Lowe makes a speech on Tuesday, with minutes from the last Reserve Bank of Australia meeting released on the same day.
3. The annual Jackson Hole meeting of global central bankers kicks off on the weekend.
Have a Great Day,
Team