Global markets rallied higher on Friday as investors clung to signs of progress on the ongoing trade talks between the United States and China.
Shares on Wall Street are at the highest levels since November, and President Donald Trump told reporters that he sees a "very good chance" of a trade deal with China, as Chinese officials decided to extend their time in Washington for negotiations.
For the week ahead, it is likely going to more of the same, with corporate earnings announcements across Australasia front of mind for local investors, and as investors digest trade related news-flow. Among the stocks to report on Friday under our coverage were Auckland Airport, and Funeral services company InvoCare, which jumped +12% on its result.
Stock in Focus: Telstra (TLS:ASX / TLS:NZX)
Shares of telecommunications giant Telstra (TLS) fell on after its 2019 interim result. Despite weak numbers, the result was within guidance due to the continued roll out of nbn and increased competitive pressure. The market was not pleased with a 27% dividend cut.
However, Telstra shares have made a sizeable recovery this year from its all-time lows, largely due to TPG Telecoms’s announcement that will not run as a fourth mobile provider if its merger with Vodafone was not to go through, making the Australian mobile market less competitive.
There is some optimism that TLS shares have bottomed out and things could turn around, especially with more the half the nbn rollout completed and most of the costs absorbed, as well as their aggressive cost cutting program. Added to this, the new proposed 5G network could provide upside. However, we remain on the side-lines with our HOLD recommendation for now.
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Australia & New Zealand Market Movers
The Australian share market was higher on Friday (ASX 200 index +0.46%) as the ASX hit a 4-month high. Funeral services business InvoCare was the big gainer on Friday, jumping +12% after releasing a well-received 2018 full year report. InvoCare reported that its operating sales revenue increased by 1.4% to $477.3 million, which management attributed to 11 acquisitions that it made and the realisation of deferred memorial sales. The number of deaths during 2018 was, as expected, lower in Australia, but InvoCare reiterated their medium-term forecasts given an aging population.
The New Zealand market was in slight positive territory on Friday (NZX 50 index +0.09%). Auckland Airport rose as it said it lifted underlying first-half earnings almost 3 percent to $136.9 million on increased aircraft movements and passenger numbers. Capital expenditure fell to $132.3 million from $208.3 million, and the airport operator scaled down its annual forecast as it pushed out construction work on some larger projects. Summerset Group shares were little changed after reporting a 21 percent increase in annual underlying earnings. Its net profit shrank as the housing market's slowdown led to smaller gains in the value of its property portfolio.
3 Things Markets Will be Watching this Week
- US-China trade deal related new-flow remains a focus for investors.
- Local earnings season continues across NZ and Australia this week.
- US Federal Reserve chairman Jerome Powell will give two days of testimony to US lawmakers on Wednesday.
Have a Great Day,
