Devon Funds Morning Note - 17 February 2026

Tuesday 17th February 2026

Year of the Fire Horse

Global

It is an unusually subdued start to the week for global indices, with the US equity and bond markets shut overnight for Presidents’ Day, removing the usual lead from Wall Street, while mainland China and Hong Kong were both closed for the Lunar New Year holidays.

US S&P 500 equity futures have spent most of the Asian session in positive territory but are now roughly unchanged. The Euro Stoxx 600 edged up 0.1% at the close. US Treasury futures are a touch firmer, pointing to a bit more downward pressure on yields after last week’s sizeable move lower. In commodities, oil has gained 1.5% after Iran conducted naval exercises near the Strait of Hormuz ahead of talks between Washington and Tehran scheduled for tonight our time.

Japan’s GDP eked out just a 0.1% quarter on quarter gain in the fourth quarter, following a contraction of 0.7% in Q3, with the economy only narrowly avoiding a technical recession. The soft backdrop is likely to bolster Prime Minister Takaichi’s push for additional fiscal stimulus, including plans to cut the sales tax on food, with subdued consumer spending reflecting the squeeze from elevated inflation. Market pricing for Bank of Japan rate hikes eased slightly, with only a few basis points now implied for March and around 16bps for April, while Governor Ueda noted that Takaichi made no specific policy requests at their first regular post election meeting.

In currency markets, moves since the end of last week have been limited. The main exception is a softer yen, with USD/JPY up about 0.5% to 153.50 and NZD/JPY also edging higher to around 92.6. This comes after a sharp yen rebound last week on the back of Japan’s decisive snap election result and largely reflects traders trimming and rebalancing positions.

New Zealand

The Kiwi market started the week by extending its recent weakness, slipping a further 0.6% as sentiment remains cautious following last week’s tech-led global sell-off. Main detractors saw Ryman lose 5.4%, Channel Infrastructure fall 3.8%, and Meridian Energy slip 3.1%.

A2 Milk notably added 5.0% after delivering a solid 1H26 result, comfortably ahead of market expectations on revenue, earnings, and net profit after tax (NPAT), accompanied by an upgrade to full-year guidance. Revenue rose 18.8%, underlying earnings were up roughly 26%, while NPAT grew 20%, reflecting margin expansion. The beat was driven by double digit gains in infant formula, particularly English label products into China and other Asian markets, alongside robust growth in liquid milk and other nutritional’s, underscoring the continuing strength of the a2 brand across key channels. Management now expects mid double digit revenue growth and higher margins for FY26, and says it is on track to reach its NZ$2bn medium term sales target a year earlier than planned, reinforcing the view that brand execution and market share gains are firmly on track.

Contact Energy also delivered a strong first-half result, with underlying profit rising sharply on the back of higher renewable energy generation and solid trading conditions. Earnings guidance for the full year had been raised from NZ$945m to NZ$965m, as management’s confidence in earnings momentum in the Manawa acquisition and the development pipeline in batteries, solar and geothermal projects progress.

Lastly, Freightways posted a broadly in-line result, showing solid underlying momentum despite a subdued operating backdrop. Earnings rose 8.5%, driven by growth in NZ Express Package business, while subsidiary Big Chill remains soft given the slower rebound in food and hospitality. Allied Express continues to be a standout, delivering strong growth and market share gains in Australia with no clear signs of slowing.

Australia

The ASX 200 started the week on firmer footing, eking out a modest gain of 0.2%. Heavy selling in Miners (-1.0%) and some profit taking in Banks (-0.2%) was largely balanced by a sharp rebound in Tech (+5.7%) and a number of strong company results.

Amongst the standouts, JB Hi-Fi rallied 7.5% on their high-quality 1H26 result, with solid sales and earnings growth amongst a tough retail environment. While trading has softened early in the second half, management views this as temporary, with resilient underlying demand, still elevated inflation and moderating cost growth expected to support a return to firmer momentum as the half progresses.

Freight rail company, Aurizon, delivered a better-than-expected 1H26 result, rallying 7.0% with earnings coming in 8% above consensus. On the other hand, BlueScope declined 2.7% with results slightly ahead of expectations, however implied second-half guidance of a 5-6% downgrade to operating earnings expectations.

Outside of earnings results, corporate news has been topical in the market, with gold miner Genesis Minerals (+7.4%) agreeing to acquire Magnetic Resources (+25.6%) via a scheme of arrangement offering of cash and shares. The transaction, worth about $640m, will add high-grade gold projects to Genesis’ portfolio and is expected to deliver meaningful operating synergies once integrated.

In infrastructure, Qube (+3.3%) agreed to be acquired by a Macquarie Asset Management led consortium in an all cash deal valuing the company’s equity at about $6.51bn, or $5.20 per share — a 28% premium to its undisturbed price. Qube’s board has unanimously recommended the scheme, which would value the group at roughly $11.7bn including debt.

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