New ZealandNZX Market Wrap-Up:
The NZX50 extended this week's gains further as it rose another 0.3 per cent. Lots of trading activity was seen in Meridian and Contact, with the former leading the market up 4.3 per cent. Electricity network operator Vector followed as runner up, lifting 3.2 per cent.
Vital Healthcare Property Trust was placed into a trading halt after it announced a $150 million equity raise. The proceeds are expected to be used for investment into $100 million of brownfield developments and the potential $95 million acquisition of a premium metropolitan hospital, which is currently leased to a major private operator.
Air New Zealand fell after its August operating stats showed passenger numbers declining by 51 per cent compared to July, not helped by Auckland's level 3 lockdown from 11 August.
While the largest decline was from the slowdown of domestic travel, numbers of returning expats also seemed to fall with trans-Tasman flights down 40 per cent and long haul flights down 11.1 per cent.
International US Markets:
At time of writing, the SPX500 was up 1.2 per cent, the Dow Jones Industrial was up 1.5 per cent and the Nasdaq was up 1.4 per cent.
Basic Material (+2.2 per cent) and Consumer Cyclicals (+1.8 per cent) were the best performing sectors on the day, while Real Estate was the weakest sector – although it still rose by 0.1 per cent.
Biopharmaceutical company, Alexion Pharmaceuticals, was the best stock in the index, up 7.7 per cent after announcing plans to buy back shares, raise 2020 sales and pursue a promising development pipeline.
Streaming service, Netflix, was up 5.4 per cent, despite news of its indictment in Texas for the lewd depiction of children in the film "Cuties".
President Trump stunned the market with his announcement that he was instructing senate republicans to cease negotiating for a stimulus deal until after the election. Though the parties expectations for stimulus differ by US$1 trillion dollars, a difficult gap to bridge, the unilateral cancellation of talks seems like poor politics, and more than a little petulant. Markets immediately slumped 1.4 per cent on the announcement, though they have since recovered.
Chinese markets remain closed for the mid-Autumn festival which runs through to Thursday. The Nikkei 225 was down 0.5 per cent.
The Trump administration has announced it will look to place restrictions on Chinese payment platforms, Tencent Holdings and Ant group, the latter of which will IPO soon. Additional restrictions on Chinese companies may inflame tensions between the two nations.
At time of writing, Gold was up 0.4 per cent, trading at US$1884.70 per ounce. WTI Crude was down 2 per cent, trading at US$40.20 per barrel. The ten-year treasury yield was down to 0.76 per cent.
Eleven IPO's are expected including Spruce Biosciences. Six companies, including Domino's Pizza, will report earnings. Additionally, continuing jobless numbers are out while several State Reserve Bank Governors will speak.
All major indices in Australia rallied strongly on the budget announcement with the Financial sector the main outperformer up 2.1 per cent, with the top five banks seeing trading volumes and gains of at least 2 per cent.
The market continued to reallocate funds to sectors that were most affected by Covid-19 following US trends, with heavy inflows in Cruise Line stocks. The only sector in the red today was Basic Materials (-0.1 per cent), with Newcrest Mining (-2.1 per cent) and Resolute Mining (-1.6 per cent) dragging the index down after the fall in gold price overnight.
The Australian budget was widespread and comprehensive in its nature, touching many aspects of the economy. The bringing forward of tax cuts will affect low to middle income earners up to A$90,000 dramatically, with the policy expected to open up A$17.8 billion of extra aggregate income over two years. The government also introduced employment subsidies for under 30's, infrastructure spend and R&D tax offsets, with economists believing this budget will allow Australia to have growth rebound strongly in 2021.
The other key policy was the ability for businesses with up to A$5 billion in revenue to completely write off any investment in new assets, likely to encompass 99 per cent of firms and cost over A$31 billion in three years.
Credit card spending across consumers and businesses has lowered considerably since Covid-19 began, with over A$6.3 billion being repaid by consumers and A$324 million being repaid by businesses. Along with this there are 580,000 fewer accounts and there does not look like any sign of new account openings growing any time soon. This could potentially benefit BNPL firms if they can capture some of the dwindling market.
AGL Energy announced a major downgrade in earnings at their AGM yesterday, with underlying earnings of A$560 to A$660 million compared to the initial A$816 million expected. The company noted that tailwinds of increasing supply costs and lower gas prices were among the key catalysts for this downgrade.
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