Keeping you up to date with the latest market moves, in association with Investment firm Jarden
NZX Market Wrap
New Zealand has had new cases of community transmission and the largest
region in the country will be moving to alert level 3 as of noon today.
A three-day shutdown of non-essential services in Auckland will not be the end of the world, a significant sell-off is likely in the markets today, reflecting fears that widespread community transmission and strict lockdown conditions will return - possibly to the entire country.
Stocks affected most by a potential return of stricter lockdown conditions will likely see the biggest sell-offs.
SkyCity, Restaurant Brands, and other discretionary stocks that revolve around in-person sales will likely be hurt. Both brands will need to shut down all Auckland operations for the coming days, and potentially for longer.
Retail brands such as Kathmandu, Hallensteins, Michael Hill and more may also be shaky for similar reasons.
Of course, these events do not happen in isolation.
Landlords such as Kiwi Property Group, which has large exposure to mixed-use mall properties may, if lockdown is extended beyond the initial three days, find themselves having to deal with increased rental abatement requests, which will take a chunk out of revenue. Precinct Properties may also see hardship requests from their new Commercial Bay shopping area tenants, although their high-quality office assets should be more resilient in the short term.
Sky Television may also see increased uncertainty - should social distancing restrictions continue; a lack of sporting events may result in a shortfall in content for Sky.
Air New Zealand and Auckland Airport will no doubt suffer initially, and longer if travel restrictions persist - Auckland is the busiest air transport hub in the country by a long shot.
Tourism Holdings may also be nervous, with Auckland's tourists potentially unable to travel for a period.
Aged care stocks may see selloffs as with the initial outbreak of Covid-19 because of market fears of community transmission wreaking devastation across the elderly population in their rest homes. The recent news from The Palms village in Christchurch may heighten this anxiety.
Stocks with more overseas exposure may be less affected, although may still likely drop in correlation with index movements - transnational software companies such as Pushpay, Vista Group come to mind, and exporters such as A2 Milk, Fonterra and Scales will not be as directly affected as other companies for now.
Detailed analysis will need to be conducted on companies' balance sheets. Those with healthy balances and low cash-burn will likely be under less pressure than those who have taken risks since the initial lockdown.
Fletcher flat after $196 million loss
Despite strong media attention around Fletcher Building announcing it expects to post a $196 million loss for the year, the stock ended slightly up (+0.3 per cent).
A2 Milk announced the appointment of David Bortolussi as CEO and managing director.
Bortolussi is group president - international innerwear of US clothing brand Hanes, which has a market cap of US$5.5 billion.
EROAD announced that its director Candace Kinser has sold all her 41,999 shares in the company for between $3.55 and $3.90 over the past week.
ANZ's Truckometer reported July numbers indicated traffic activity was almost back to normal - light traffic index was up 5.6 per cent month on month, and up 9.5 per cent year on year. Heavy traffic was up 2.7 per cent month on month and 10.2 per cent year on year.
The Chinese markets faced their biggest one-day losses in more than three weeks, the Shanghai index was down 1.15 per cent and the Shenzhen was down 1.45 per cent. This may have been caused by increasing tension with India – both nations' militaries are moving into each other's territory to expand production and logistics.
In the other news, Russian leader Vladamir Putin has reportedly signed a accine deal to begin production in Russia next month, despite ongoing human testing.
The US markets continue to rotate from high performing tech stocks to underperforming sectors such as financials and energy.
At the time of writing, the Dow Jones was up 0.2 per cent, the S&P 500 was down 0.2 per cent and the Nasdaq looks to post its second loss of the week, down 0.9 per cent.
The markets were supported by Trump's talk of lower tax rates and the government approaching agreement on a stimulus package in early trading, however, in the afternoon session markets were dragged down significantly.
Wholesale prices rose by 0.6 per cent for the largest increase in two years, supported by the recovery in oil prices. The overall inflationary pressures, though, are still very subdued because of the coronavirus.
Underperforming sectors were brought down heavily on the back of lowering Covid-19 deaths and infection numbers, leading to investor sentiment to expect a more buoyant recovery. Large Financials had a positive day, with JP Morgan (+4.6 per cent), Bank of America corp (+2.65 per cent), Goldman Sach's Group Inc (+2.5 per cent) and American Express Co (+2.5 per cent) all posting large gains.
Bio tech companies underperformed on the day with Novavax down 15.8 per cent and Inovio Pharmaceuticals down 22.8 per cent after reporting weaker than expected earnings today.
At the time of writing WTI Oil was down 0.5 per cent to US$41.70 a barrel, wiping out yesterday's gains. The gold price is set to have its worst one-day decline in over seven years, down 5.5 per cent to US$1930 per ounce. The selloff overnight has been due to a variety of economic factors such as Russia agreeing to a vaccine, a stronger US dollar and the US government closing in on a stimulus package, which all bought more risk appetite away from Gold. The US 10-year treasury yield posts its largest gain of the month up over 5 basis points to 0.64 per cent, largely due to decline in gold prices.
ASX Market Wrap-up:
The ASX200 rose 0.5 per cent as large cap stocks lifted and travel stocks performed well amid reported Covid cases being in the low 300s.
Sydney Airport were placed into a trading halt, as they finally raise equity, a significant $2 billion dollars. The deal is structured as a renounceable one-for-5.15 rights issues at $4.56 a share, a 15.4 per cent discount to the last close.
The funds will be used to reduce leverage on the balance sheet as earnings continue to be materially impacted due to travel restrictions.
In the market, the banks continue to perform strongly prior to Commonwealth Bank of Australia's earnings results today.
Westpac led the banks' increases, rising 2.7 per cent to A$17.78 while National Australia Bank lifted 2.4 per cent, ANZ rose 1.8 per cent and CBA finished the day up 1 per cent.
Travel-related stocks, Flight Centre (+6 per cent), Webjet (+5.6 per cent) and Corporate Travel (+4.4 per cent) all lifted among signs of an improving outlook in Victoria, although arguably case numbers are still high at over 300.
Mesoblast shares tanked yesterday, falling 31 per cent or A$1.51, to A$3.36 amid the FDA concluding that it is unclear whether clinical trial results of paediatric patients submitted, provide evidence of sufficient benefit in the treatment of steroid-refractory acute Graft Versus Host Disease (SR-aGVHD).
James Hardie was the strongest performer yesterday rising 6.8 per cent to A$32.22. This follows a solid first quarter earnings announcement in which FY21 net profit after tax was tracking above consensus.
In Australia today a significant number of firms are reporting, the notable name of the day is Commonwealth Bank who will set the tone for the big four banks in Australia. Share registry Computer share; Toll road network Transurban; Transport, Utilities and Engineering firm Downer EDI; online employment firm Seek; and Magellan Financial Group also report their FY20 earnings today.
The US data out tomorrow will give insight into how the market is operating with strong lockdown measures. This includes Core CPI, Consumer Price Index and the Federal Budget.
For more information on the latest market moves, get in touch with Jarden.
This Morning Brief has been prepared in good faith and reflects opinions and views at the time of publication, using external sources, systems and other data and information we believe to be accurate, complete and reliable at the time of preparation. We make no representation or warranty as to the accuracy, correctness and completeness of that information, and will not be liable or responsible for any error or omission. This Morning Brief is not to be relied upon as a basis for making any investment decision. Please seek specific investment advice before making any investment decision. Jarden Securities Limited is an NZX Firm, a broker disclosure statement is available free of charge at www.jarden.co.nz. Jarden is not a registered bank in New Zealand.
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