Global markets were lower on Friday, as the US market snapped a three-day streak of record closes & the US dollar rose, following an unexpectedly strong US payrolls report that led investors to reassess how dovish a stance the Federal Reserve may take at its next meeting.
The US Labor Department data showed nonfarm payrolls rose by 224,000 jobs in June, the most in five months, solidly beating economists' expectation of 160,000 additions. The jobs report also pointed to slowing wage growth and mounting evidence that the economy was losing momentum, which could still give the Fed enough of a cushion to cut rates at the end of the month.
For the week ahead, the focus will be on quarterly US Corporate earnings season which kicks off this week. It will be an interesting earnings season, as investor attention usually shifts back to company profit announcements and it will be interesting to see company comments around trade & with tax cut benefits now rolling off. Key names reporting include Microsoft, Johnson & Johnson, JP Morgan, Wells Fargo, and Netflix.
Stock in Focus: Coca-Cola Amatil (CCL:ASX)
Shares in CCL have staged a recovery of late, even as at their latest presentation they reiterated 2019 will be another 'transition year'. Generally NZ & Fiji, PNG and Alcohol & Coffee are delivering in line with the long term plan but Australia and Indonesia remain tough (CCL’s main Australian business continues to struggle with the loss of major contracts, the container deposit scheme and the structural shift of consumers away from fizzy drinks which are considered unhealthy).
CCL has alsoannounced it has successfully completed the sale of its Fruit and Vegetable processing business SPC after a review and divestment process commenced in August 2018. The business will be sold to Shepparton Partners Collective Pty Ltd for a consideration payable of $40m. Profit on Sale of the asset is expected to be around $10-15m. Given the Company effectively wrote the value of the SPC business down to zero it looks like a decent win for the company.
We currently have a HOLD rating on CCL.
Members should look out for a full update on CCL to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market continued to make news higher on Friday (ASX 200 index +0.50%) as the ASX finished the week up 2% after posting gains every day of an week for the first time since October. Every sector gained except for utilities and mining companies, with the latter down after the price of iron ore dropped 3% following a five-day rally.
Consumers stocks did well after the Coalition passed $158 million in tax cuts offering cash handouts of up to $1080 to Australians this year, with Harvey Norman, Kmart owner Wesfarmers, and JB Hi-Fi rising.
The New Zealand market was higher on Friday (NZX 50 index +0.54%) led higher by a recovery in Fonterra Shareholders' Fund units after a sharp sell-off a day earlier. Utilities and property investors remain in favour among investors wanting a decent yield.
3 Things Markets Will be Watching this Week
- US Corporate earnings season kicks off this week.
- US Fed chairman Jerome Powell will testify before Congress on Wednesday and Thursday.
- In Australia, a business confidence survey on Tuesday will give its first report for a full month since the Coalition’s surprise Federal election victory
Have a Great Day,
