Global markets moved between small gains & losses on Friday as investors digested a mixed US jobs report and bet on a Federal Reserve interest rate cut this month, while China’s stimulus plan helped ease some concerns around global growth.
In comments in Zurich over the weekend, Federal Reserve chairman Jerome Powell said US policymakers would continue to use the tools they had to bolster growth. Fed officials are particularly focused on whether a drop in business spending and a manufacturing slump is spreading to other parts of the US economy. The Fed's next policy gathering is September 17-18.
Larry Kudlow, an economic adviser to President Donald Trump, sought to downplay expectations for a resolution of the US-China trade dispute – "The stakes are so high, we have to get it right, and if that takes a decade, so be it" Kudlow said. Once again, we do not think there is an overnight solution to the trade & technology war, which is likely to create market volatility.
Stock in Focus: Treasury Wine Estates (TWE:ASX)
Shares in Treasury Wine Estates are close to all-time highs after recently releasing another impressive result, shutting down recent reports by short sellers around the performance of the business.
TWE reported a 17% increase in net sales revenue to $2,831.6 million. In constant currency net sales revenue lifted 12% on the prior corresponding period, representing the strongest organic growth rate in the company’s history.
TWE remains vulnerable to a renewal of international trade tensions, especially as they affect China, a risk which must be kept in mind. In saying that, TWE has been one of our top performing ASX stock recommendations and we continue to believe TWE will benefit from demand as the Chinese consumer pallet evolves, as part of our dining boom investment theme – as the growing Asian middle class provides a demand tailwind for quality AU/NZ food products.
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.
Australia & New Zealand Market Movers
The Australian market was higher on Friday (ASX 200 Index +0.52%) on the back of optimism that trade tensions could be easing, with tech stocks the standout performers as investors regain their appetite for risk. Australian bond yields surged, indicating less demand for the safe haven asset, with yields on 10-year bonds gaining +0.12% for their biggest single-day move since the day after Donald Trump’s election as US president.
The New Zealand market reached new heights on Friday (NZX 50 Index +1.01%) with the NZX 50 rising +4% last week with high-yielding utilities and property stocks still in hot demand against a backdrop of ultra-low interest rates. Exporters remained in favour despite the kiwi dollar recovering from its four-year low earlier in the week. Fonterra shares were lower after it said it will delay releasing its annual report to give it more time to complete its audited accounts.
3 Things Markets Will be Watching this Week
- Trade War related news-flow is likely to continue to feature in headlines.
- US inflation data is published on Thursday.
- Thursday's policy meeting at the European Central Bank will be watched closely
Have a Great Day,