Craigs Investment Partners Research Team, 21 June 2019

New Zealand shares traded higher this week with the benchmark NZX 50 reaching fresh new highs. European Central Bank President Mario Draghi opened the door to more stimulus and US President Donald Trump announced plans for an "extended" meeting with Chinese President Xi Jinping at the G20 summit in Japan next week. Meanwhile, the Federal Reserve held interest rates steady and pointed to possible interest rate cuts in the future, citing rising “uncertainties” about the economic outlook.

Domestic newsflow was dominated by a number of executive departures. Firstly, ANZ confirmed the appointment of Antonia Watson as Acting CEO, following the departure of David Hisco. Hisco’s departure follows ongoing health issues as well as Board concern about the characterisation of certain transactions following an internal review of his personal expenses.

Meanwhile, Air New Zealand Chief Executive Christopher Luxon announced his resignation and will be stepping down in September, after seven years in the role. Luxon has hinted to a move to politics and a possible career with the National Party. Air New Zealand shares are down 12.6% this year.

Contact Energy also announced Chief Executive Dennis Barnes will be stepping down at the end of 2019, after eight years in the role, while Meridian Energy announced the departure of Chief Customer Officer Julian Smith.

Mobile-app payment provider Pushpay upgraded FY20 guidance at its Annual Shareholders Meeting. The company upgraded operating earnings from US$17.5 - $19.5m to US$18.5 - $20.5m and reiterated revenue guidance for US$122.5 -$125.5m. Shares closed 2.6% higher at $3.90 following the news.

In economic news, Stats NZ said gross domestic product increased 0.6% in the March quarter, following a 0.6% rise in the December 2018 quarter. “Construction was the main contributor to GDP growth this quarter, rising 3.7%, on top of a 2.2% increase in the previous quarter,” National Accounts Senior Manager Gary Dunnet said. The increase in construction reflected higher investment in both residential and non-residential buildings.

The Global Dairy Trade auction reported its third consecutive fall in dairy commodity prices early Wednesday morning with the headline index down 3.8%, dragged lower by a 4.3% decline in whole milk powder. Butter suffered the heaviest drop, down 5.7%, while cheddar fell 4.3% and anhydrous milk fat was down by 3.3%. Rennet casein was the only product to post an increase, with its price up 2.3%.

Across the Tasman, the Australian sharemarket hit an 11-and-a-half year high closing within 3% of 2007's best-ever finish. The Reserve Bank board meeting minutes indicated that the country’s central bank is likely to cut interest rates in the months ahead, with markets pricing in a 75% chance of a rate cut by August. Within the ASX 200 index, software firm Xero closed above A$60.00 and index heavyweight CSL hit a nine month high of A$215.20.

Turning to Europe, European Central Bank (ECB) President Mario Draghi suggested that the central bank will provide more stimulus if inflation does not pick up. Speaking at the ECB Forum on central banking in Portugal, Draghi said, "Further cuts in policy interest rates and mitigating measures to contain any side effects remain part of our tools."

Meanwhile, the US and China are rekindling trade talks ahead of a meeting next week between Presidents Donald Trump and Xi Jinping. Financial markets cheered on hopes that an escalating trade war between the two countries would abate. Trump said on Tuesday that teams from both sides would begin preparations for the leaders to sit down at the G20 summit in Osaka. Trump tweeted “Had a very good telephone conversation with President Xi of China. We will be having an extended meeting next week at the G20 in Japan. Our respective teams will begin talks prior to our meeting.” Global markets rallied following the tweets.