Craigs Investment Partners Research Team, 12 July 2019

New Zealand shares hit a fresh record on Wednesday, with the benchmark NZX 50 index gaining 1.1% to 10,650, surpassing Friday's previous record. The jump was thanks to index heavyweight a2 Milk, which surged 6.6% to $16.25 on the back of a series of broker upgrades. Its shares closed $1.00 higher on the day, lifting its market capitalisation by $735m to $11.9bn and solidifying its position of largest company on the NZX by market cap.

Meanwhile, Port of Tauranga fell from its record highs on news that log export prices in China have slumped. The problem stems from logs sitting on the wharves at ports in China, not being sent to construction projects inland. The latest fall, which happened in a matter of weeks, brought log prices down by 15%.

The listed property sector continued to outperform with Vital Healthcare and Precinct Properties providing revaluation updates. Vital Healthcare announced an upwards portfolio revaluation of $102.4m, up 5.9% for the 12 months ending June 2019. Meanwhile, Precinct Properties reported a preliminary revaluation gain on its property portfolio of approximately $162m, or 6.2%. This increases the value of Precinct’s portfolio to around $2.8bn at 30 June 2019.

Turning to the US, the major US stock indices also reached record highs on Wednesday following dovish remarks from Federal Reserve Chair Jerome Powell which boosted the case for an interest rate cut later this month. The S&P 500 briefly broke above 3,000 for the first time, while the Nasdaq Composite and Dow Jones Industrial Average also reached all-time highs. Powell said business investments across the US have slowed “notably” recently as uncertainties over the economic outlook linger. However, the major stock index pared gains as Powell answered questions. Powell reiterated that current trade conditions and muted economic activity have dampened the US economy’s outlook. However, he said that the US economy remains on solid ground.

The S&P 500 closed back below 3,000, but still ended up 0.5% at 2,993. The Dow Jones rose 0.3% after rallying nearly 200 points, while the Nasdaq Composite ended the day off its session high, but managed a record close at 8,202.

In company news, Tesla shares rose more than 3% on news the company has told employees to prepare for an increase in production, while shares in Amazon closed back above US$2,000 per share.

Turning to Australia, the Australian Prudential Regulatory Authority (APRA) this week said that the banks would be required to increase capital buffers by three percentage points by January 2024 having initially told the banks they would increase capital by four to five percentage points. Ratings agency S&P Global Rating upgraded its outlook for the big four banks from "negative" to "stable" after APRA's capital buffer requirements were modified. Shares of the major banks closed slightly lower following the news.

Separately, consumer confidence in Australia fell to a two-year low as consumers become increasingly concerned about the state of the economy and their chances of holding on to a job, despite the prospect of personal income tax cuts and falling mortgage rates. Australia’s benchmark ASX 200 index has surged over 18% this year and is about 2% away from its record high, reached in 2007. However, the sluggish economy and housing slump continues to weigh on sentiment.

Looking ahead, markets will look to the US reporting season, which ramps up next week.