Research Team, 1 February 2019

This week, the main event for investors was the US earnings season.

Three of the four biggest companies - Microsoft, Amazon and Apple - announced results. Trade remained in focus with Chinese Vice Premier Liu He arriving in Washington for the latest round of negotiations. The Federal Reserve held its first meeting of the year, and in Europe, Brexit continued to dominate headlines. The US government shutdown was less of an issue, after Congress had agreed on a temporary deal to reopen for three weeks. Locally, the economic calendar was sparse.

In corporate news, SkyCity outperformed after upgrading its profit outlook.

The casino operator said strong growth in its international business boosted first half earnings more than expected. However, management warned second half earnings growth could be harder to achieve, given the strong result in the prior year. The company expects full year normalised profits to be only slightly ahead of its previous guidance. The company will report its first half result on February 13. Shares rose to $3.79, their highest price since mid-November.

Air New Zealand’s share price slumped 13.5% after lowering its earnings forecast.

The airline blamed Rolls Royce engine issues (costing them up to $40m), softening inbound tourism traffic and slower growth in domestic travel. The downgrade impacted other tourism related stocks in the index, with shares of Tourism Holdings and Auckland Airport closing lower. Earlier in the week, Auckland Airport had reached an all-time high at $7.70.

The Federal Reserve kept its benchmark interest rates unchanged at a range of 2.25% to 2.5%, as widely expected.

Fed Chair Jerome Powell issued his strongest statement yet, saying the case for raising rates has weakened somewhat and that the Fed will be "patient" on future policy decisions. Powell also mentioned that the Fed did not change its course on interest rates in response to Trump. Also of concern to the Fed are geopolitical issues like Brexit and the economic slowdown in China. The Fed is scheduled to meet next on March 19.

Tech giants Facebook and Apple don’t disappoint with latest earnings.

Facebook surged more than 12% after beating on earnings and revenue, with daily active users growing in all geographical areas. Monthly active users jumped in every region except for North America - posting particularly strong growth in Asia-Pacific. Meanwhile, shares in Apple jumped over 6% following its result. The result was largely in line with expectations and guidance was better than feared, following management’s unexpected downgrade earlier in January. Apple’s iPhone user base continued to grow, highlighting the strength of the iOS platform.

In Australia, headline inflation beat forecasts and rate hikes remain distant.

Core inflation ended the year below the central bank’s target band, reinforcing views that interest rates will remain at record lows. Core inflation has now undershot the RBA's long-term target band of 2% - 3% for 12 straight quarters, the longest stretch since the series began. Meanwhile, the mining sector got a lift on the back of strong iron ore and copper prices, following the mining disaster in Brazil. Energy stocks also got a boost with oil prices being supported by US sanctions on a Venezuelan owned oil company.