Global markets were mixed on Friday, as US stocks snapped a three-day rally as Apple shares dropped following a disappointing forecast and the White House dampened optimism over US-China trade talks.
Strong US jobs and wages growth reinforced expectations the Federal Reserve will raise rates in December. US employers added 250,000 jobs to their payrolls in October and unemployment held at a 49-year low of 3.7% Also, wages increased 3.1% from a year earlier, the biggest year-over-year gain for average hourly earnings since 2009. As we have discussed, we are watching US inflation data closely given its importance for driving interest rates.
For the week ahead, the big event will be the US mid-term elections which take place on Wednesday (AU/NZ time). If the polls are correct, then President Trump and Republicans may lose control of the House of Representatives to the Democrats. It is also a busy week in terms of central bank announcements, with the US Fed, RBA, and RBNZ all making decisions this week.
Stock in Focus: Macquarie (MQG:AX)
Macquarie shares jumped on Friday, as the investment bank continues to outperform the rest of the Aussie financial sector.
The jump came as MQG upgraded full-year profit guidance, announcing earnings are now expected to be 10% ahead of the 2018 numbers, having earlier forecast earnings in the 2019 financial year would be in line with the previous period. This puts MQG on track for yet another record full-year profit, after delivering $2.56 billion earnings for the 2018 financial year.
We have had a positive view on MGQ for some time now, and while we have highlighted that its profitability is impacted by volatile factors such as equity market conditions and exchange rate moves, we believe factors could continue to swing in MQG’s favour.
We are currently BUY rated on Macquarie.
Australia & New Zealand Market Movers
The Australian share market was slightly higher on Friday (ASX 200 index +0.14%) lifting local shares to their best weekly gain since November 2016, as the market recorded its sixth straight gain. CSL led the market gains this week as it rebounded from a poor two months
The New Zealand market was a touch lower on Friday (NZX 50 index -0.09%) as the prospect of a slowing domestic economy came head-to-head with improved global sentiment. The ANZ Roy Morgan survey showed consumer confidence index slid further in October. While there was a slight improvement in people's optimism about their own situation, the future conditions index fell to its lowest since late 2015. In stock news, Spark was lower as the firm reiterated its full-year earnings guidance of $1.025 billion to $1.055 billion, not including dividends from international cable provider Southern Cross. Chief executive Simon Moutter also used the firm’s annual meeting to urge faster action from the government on allocation of 5G spectrum.
3 Things Markets Will be Watching this Week
- US mid-term elections take place on Wednesday (AU/NZ time).
- The US Federal Reserve makes a policy statement on Friday (AU/NZ time).
- The Reserve Bank of Australia makes an interest rate decision on Tuesday, while the Reserve Bank of NZ makes a monetary policy announcement on Thursday.
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