NZ market likely to wait and see how events unfold

Investors focus on company results. Photo by Reuters.
Investors focus on company results. Photo by Reuters.
New Zealand's sharemarket, the first in the world to open for the new week, is likely to take a wait-and-see approach as investors digest ongoing geopolitical events that may escalate.

Craigs Investment Partners broker Chris Timms said yesterday it seemed investors overseas were focusing more on company results and the strength of economic recoveries than on increasing political tensions around the globe.

United States stocks rebounded at their close on Saturday (NZ time) after a Malaysian airliner was downed in eastern Ukraine and Israel increased its ground assault in Gaza.

''The Dow Jones finished strongly, nearly a new record, driven by better-than-expected results and no further escalation of hostilities.

''On one side of the world we have huge political tensions and on the other people focused on company reports. We now wait to see which event has the most influence in the coming week.''

The NZX should follow the lead of the US markets and be in a positive mood, Mr Timms said.

German Bund yields fell to near-record lows as investors bought assets perceived as safe havens after the downing of the airliner, a potentially pivotal moment in the worst crisis between Russia and the West since the Cold War.

In the US, buyers were embracing risk to buy at every dip following the fall of the Dow Jones Industrial Average after the index had completed its 15th high of the year last week.

Wedbush Securities managing director Michael James told AAP market negativity was being shrugged off, for the most part. The market was showing resilience.

Data out of the US showed financial markets were giving greater weight to positive economic news compared with geopolitical threats such as Ukraine, where the economic implications were unclear.

Early results from the US reporting season were focusing on strong profitability and strong merger and acquisition activity.

Standout results so far included: Dow Jones-listed Intel, which raised its profit forecasts and announced $US20 billion ($NZ23 billion) in additional share repurchases; Google, which notched a 22% increase in revenue behind a surge in ''paid clicks''; and Goldman Sachs, which reported $US4.10 per share in earnings, beating analyst forecasts by more than $US1.

By week's end, 84 companies in the Standard and Poor's 500 had reported earnings, with 56 beating analyst expectations, 15 missing and ''analysts may be underestimating the level of prospective improvement in the second quarter'', wrote Carmine Grigoli, chief investment strategist at Mizuho Securities in New York, in a market report.

The latest overall profit estimate was up from a July 1 forecast of 6.2%, while revenue growth, now 3.2%, was on track to be the highest since the third quarter.

Mr Timms said it was easy to overestimate the excitement. Many of the early reporting was by financial companies, not always the best barometer of US Main Street activity.

The next two weeks would see 60% of the S&P 500 release their results. That was key for investors looking for confirmation the anticipated economic rebound from the first quarter was more than just weather-related, he said.

Among the companies set to release figures are Apple Inc, McDonald's Corp, Coca-Cola Co and Caterpillar Inc.

So far in July, six of 10 S&P sectors - particularly healthcare, consumer staples and energy - had shown upward revisions from June, according to Citigroup.

The US economy contracted at a 2.9% annual pace in the January-March period, its worst performance in five years.

Recent jobs and other economic data suggested the economy was growing briskly heading into the second half, with growth forecasts for the second quarter now topping a 3% annual pace.

June's payrolls report showed a surge in job growth and the jobless rate closing in on a six-year low.

This week, US data will include reports on existing-home sales, new-home sales and durable goods orders.

Major data out in New Zealand this week includes the Reserve Bank's official cash rate decision. Analysts are forecasting a rise of 0.25% to 3.5% for the OCR, followed by a pause.

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