Research Team, 15 February 2019

It was a largely positive week for the NZX 50 which is now just a fraction off its all-time high of 9,375 achieved on 21 September 2018. Within the index, Mercury Energy, Meridian Energy, Genesis Energy, Chorus, Argosy Property, Precinct Property and Restaurant Brands all closed at records.

The Australasian reporting season is now well underway and will remain in focus for the next three weeks.

This week saw results from Contact Energy, SkyCity, Skellerup and NZX. Across the Tasman, we heard from Amcor, CSL, Goodman Group, Telstra, AMP and Transurban.

Contact Energy led the gains on Tuesday after reporting a 28% gain in operating earnings as its generation arm benefited from higher wholesale electricity prices. The company increased its dividend guidance to 39 cents per share, seven cents higher than the previous year. Additionally, shares of Skellerup received a boost on the back of its half year result which saw net profit after tax rise 15%, while operating earnings increased by 11%.

At the other end of the spectrum, shares of SkyCity slipped 4.0% after reporting an 11.4% increase in net profit. The company’s key Auckland assest performed well, however the New Zealand International Convention Centre was delayed further, with completion now expected in the second half of 2020. SkyCity said it will buy back 5% of its shares on the NZX over the course of 2019, equating to $135m at the current share price.

Off the main index, shares of Briscoe Group also got a boost on the back of a 5.8% increase in fourth-quarter sales, reporting yet another record profit.

The Reserve Bank of New Zealand (RBNZ) held interest rates at a record low.

It also pushed out its forecast for an increase, amid slowing global growth and forecasts of subdued inflation. Reserve Bank Governor Adrian Orr kept the Official Cash Rate (OCR) at 1.75% for the 15th consecutive session and said he expects to keep it there through 2019 and 2020. Governor Orr said the direction of the next OCR move could be up or down. The RBNZ sees employment at near its maximum sustainable level, however, core consumer price inflation remains below the 2% target mid-point, which it sees as necessitating continued supportive monetary policy. The local sharemarket eased from session highs after the statement, while the NZ dollar jumped more than 1% versus the greenback.

Globally, central banks are growing increasingly cautious of raising rates against a backdrop of slowing global growth and risks such as the US-China trade dispute and Brexit. The US Federal Reserve has paused its rate increases while Australia’s Reserve Bank abandoned its tightening bias as a tumbling property market dampens the outlook.

Global markets rallied on continued optimism around a possible US-China trade deal.

There were encouraging signals on trade from the White House after President Trump said that he was willing to push back the March 1 deadline if ongoing talks between the US and China continued to move in the right direction. US tariffs on US$200bn worth of imports from China are scheduled to rise to 25% from 10% if the two sides cannot reach a deal by the deadline.

Meanwhile, fears of another partial government shutdown eased.

Trump said that a second government shutdown is unlikely after officials agreed to a deal to fund the Federal Government. “I don’t think you’re going to see a shutdown. If you did have it, it’s the Democrats fault,” he said on Tuesday. The deal still need to be approved by Congress and signed by the President.