Global Markets tumbled on Friday after the US-China trade war escalated in dramatic fashion, with President Donald Trump demanding that American companies seek alternatives to doing business with China after Beijing announced its own slate of trade measures – saying it would impose tariffs on $US75 billion of US imports.
The developments overshadowed a highly anticipated speech from US Federal Reserve chair Jerome Powell, in which he reiterated a pledge the central bank would “act as appropriate” to support the economy, but he stopped short of committing to the series of rapid-fire rate cuts Trump has been demanding. RBA Governor Philip Lowe criticised the global rush to lower interest rates as ultimately counterproductive but acknowledged the lack of political stability was making the pressure difficult to resist.
Stock in Focus: Costa Group (CGC:ASX)
Costa Group shares were under further selling pressure on Friday as it experienced continued weakness in berry and mushroom prices.
While management did point to earnings likely being at the lower end of previous guidance, what has the market worried is that they highlighted potential downside risks.
While commodity pricing for agri-businesses is notoriously difficult to predict, we believe a number of issues facing Costa will improve heading into 2020 including Morocco harvest timing, raspberry crumble elimination, and Citrus fruit fly issues.
On a medium term view we remain positive despite shorter term challenges. We see Costa as set to benefit from the multi-year demand backdrop for food globally as well as being attractive to health conscience consumers.
We currently have a BUY recommendation on Costa Group.
Members should look out for a full update on Costa to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian market was higher on Friday (ASX 200 Index +0.33%) in a mixed day for markets. In stock news, Ardent Leisure has narrowed its full-year loss to $60.9 million as revenue jumped at its US entertainment centres but the company's troubled Dreamworld theme park is recovering more slowly than anticipated.
The New Zealand market was lower on Friday (NZX 50 Index -0.96%) as index heavyweights Meridian, Chorus, A2 Milk retraced.
In stock news, Skellerup led the index lower even as the rubber goods maker reported a record profit through the strength of its industrial division. Its agricultural unit posted flat earnings in a mixed international dairy market. Outside the benchmark index, Comvita rose after reporting a $27.7 million loss as it wrote down the value of goodwill. The honey products maker delayed reporting the annual result to discuss the write-downs with its auditor. Winemaker Delegat Group reported operating earnings in line with expectations at $99.3m, up +11% year on year supported by case sales up +10% and average prices -1% on weaker country/product mix.
3 Things Markets Will be Watching this Week
- Trade War related news-flow is likely to dominate headlines.
- Australasian company reporting season moves into its latter stages.
- Escalating geopolitical tensions between Hong Kong & China are also creating nervousness.
Have a Great Day,