INSIGHTS BLOG

WEEK IN REVIEW: 29 APRIL - 3 MAY

Research Team, 3 May 2019

The local NZX 50 rose 1.7% for the month of April, extending gains for a fourth straight month and taking its year-to-date increase to 13.1%. The index bounced between losses and gains this week as it hovers around the 10,000 level.

The a2 Milk Company started the week at an all-time high of $16.77 and by far remains the biggest company on the NZX

However the market darling fell from its highs after reporting a 42% rise in revenue in the nine months through March, making no material change to its FY19 and FY20 outlook. Still, the milk marketer remains the best performer in the index this year, with shares up 44.6% year-to-date.

Shares in SkyCity dropped 4.9%

After the casino operator lowered its annual guidance on weaker than expected trading. Sky TV closed Wednesday at a new record low of $1.21.

ANZ jumped 3.3% after reporting a 2% increase in net profit which was comfortably ahead of market expectations.

Management said that despite economic uncertainty - low unemployment, interest rates and China are likely to be key drivers to global growth for the years ahead, and New Zealand remains in a good position to prosper.

EBOS Group resumed trading Wednesday after its shares were placed in a trading halt to complete its $175m capital raise.

The company said proceeds from the placement will initially be used to pay down bank debt and reduce gearing, before being used for strategic acquisitions, organic growth initiatives and general corporate purposes as they arise.

Outside of the benchmark index, NZ King Salmon tumbled 17.5% to $2.45 on Wednesday.

This came after warning that warm water had increased its fish mortality rate. This will cause its harvest to be smaller than expected for the next two seasons.

In economic news, Stats NZ said the seasonally adjusted unemployment rate was 4.2% in the March 2019 quarter

Down from 4.3% in the December 2018 quarter. The fall in the unemployment rate reflected a rise in the working-age population. Meanwhile, jobs growth was negative in the first quarter and wages growth missed expectations, boosting expectations for a rate cut when the RBNZ meets on May 8.

Meanwhile New Zealand firms remain pessimistic about the general economic outlook

With few seeing growth in their own activity and more than half expecting weaker earnings. A net 37.5% of the 353 respondents to the ANZ Business Outlook expect the economy will slow over the coming year, in line with the 38% reading in March. There was a small improvement in expectations for firms' own activity with a net 7.1% anticipating an improvement, compared to 6.3% a month earlier.

Elsewhere, US markets closed lower on Wednesday

And the S&P 500 snapped a three-day streak of record high closes after comments from Federal Reserve Chair Jerome Powell appeared to dampen hopes that the US central bank could move later this year to cut interest rates. The Fed left interest rates unchanged and reiterated it will stay patient with rates amid a mixed economic backdrop.

The global reporting season ramped up this week with more than 150 S&P 500 companies reporting earnings

At the half way point in the earnings season, the results have been better than expected. Some 76% of S&P 500 companies have reported earnings above estimates, while 56% have exceeded sales forecasts.

One of the key results was Apple.

The company’s share price jumped 5% after reporting a stronger than expected second quarter result. Sales were comfortably ahead of expectations driven by strong iPad and Apple Watch sales. Management’s guidance also indicates that Apple may be through the worst of the recent iPhone slump in China. The news pushed the company’s market cap through the US$1 trillion for the second time since first hitting the milestone in September 2018.