Keeping you up to date with the latest market moves, in association with Investment firm Jarden
With Melbourne now in lockdown, curfews in place and with wider Victoria joining in from Wednesday, the impact on the retail sector, and the broader economy, will be large. New Zealand-listed retail stocks such as Kathmandu are set to see an impact to their Australian sales as their Melbourne stores close for the next six weeks.
This lockdown is also likely to play a key role in the RBA's official cash rate decision today. With rates at 0.25 per cent, the RBA has room to manoeuvre before taking rates negative - something they have been explicitly said they would not do.
NZX Market Wrap:
Most of the NZX 50 constituents ended in the red yesterday, although large cap stocks held up relatively well.
Scales (-6.1 per cent) was the biggest loser of the index, and Gentrack (-5.5 per cent), Pushpay (-4.9 per cent) and SkyCity Entertainment (-3.6 per cent) followed.
Recent hot stock Cavalier ended down 30 per cent today, effectively eliminating almost all last week's gains.
Kiwi Property Group lost less than a per cent after it reportedly put its $100 million Sylvia park development/upgrade on halt, with no timeframe provided for resumption. It saw significant institutional action as the second-most traded stock of the index with 3.4 million shares, slightly less than Sky Television (-1.6 per cent) with 3.5 million shares.
Scales drops after profit guidance drop
NZX-listed Scales dropped by 6.1 per cent after it provided an update advising that net profit for 2020 is expected to be at the bottom end of their guidance range, which was $30 million to $36 million. The profit figure was materially lower than expectations, analysts had expected profits to be around 10 per cent higher.
The main hit came from the company's horticulture division, which expected ebitda to be "materially below" previous year's figure of $39.7m. Sales are at approximately 70 per cent of expected volumes, down in Asia and near markets after decreased Chinese domestic apple demand caused a ripple effect to neighbouring regions.
On the positive side, European and UK markets have seen demand uplift for varieties including Nelson's braeburn apples. Prices for these should be higher than last year.
Bullish investors might also suggest that the detrimental market conditions in Asia are temporary flow-on effects of Covid-19 and forecast a bounce-back in sales after Chinese domestic demand returns.
Scales may also have a competitive advantage over other international exporters with the Covid-free New Zealand image helping its product with a fresh, healthy premium branding.
China began the week on a positive note with the Shenzhen and Shanghai markets up 2.4 per cent and 1.75 per cent respectively. Risk assets in America followed suit, looking at the positive economic data and continuing to look past increasing Covid-19 cases and lockdown procedures. At the time of writing, the Dow Jones was up 0.97 per cent, the S&P 500 was up 0.89 per cent and the Nasdaq up 1.56 per cent, as large tech stocks continued their push higher (+2.4 per cent). The ISM Manufacturing index showed more signs of growth, up 1.6 percentage points for July to 54.6 per cent. This was 0.6 percentage points above expectations. The New Orders Index and Production Index also showed strong momentum going forward, up 5.1 per cent and 4.8 per cent respectively. With some of the period covered by lockdowns, the market reacted positively to these numbers being above expectations.
Microsoft (+5.45 per cent) has opened talk with Chinese company Tiktok for a potential acquisition, even though Donald Trump is openly talking of banning the company in America. Microsoft is working to convince the Government it will be able to add world class security to this app and solve many issues that have come up around privacy.
HSBC bank (-2.9 per cent) struggles in the Covid-19 environment, with earnings before tax dropping by 65 per cent to EUR 4.32 billion for the first half of 2020, well below analyst expectations of EUR 5.69 billion.
WTI Oil is back to levels seen last Monday, up 1.66 per cent to US$40.60 per barrel. Gold is relatively stable up slightly to US$1990 per ounce. The US 10-year treasury yield is relatively unchanged from last week at 0.59 per cent. The yield has continued to decline since June 6, when it peaked around 0.95 per cent.
ASX Market Wrap:
The ASX200 plummeted on open yesterday, falling as low as 5860 points as it reacted to the lockdown and curfew measures in place in Victoria. It recovered over the day closing flat, or a mere 1.7 points down. Financial services firm Net Wealth was the strongest performer on the index, rising 5.3 per cent to close at A$12.65. Energy and fuel company Viva Energy rose 5 per cent to A$1.69. Fortescue Metals Groups hit a 52-week high closing up 2.6 per cent at A$17.87.
The leading sector was healthcare (up 2.3 per cent), while financials led the losses (down 2.1 per cent).
Healthcare companies, Cochlear Limited and CSL Limited gained 4.6 and 2.6 per cent respectively as the sector climbed.
ANZ and National Australia Bank fell 4.1 per cent, to A$17.22 and $16.94 respectively. Commonwealth Bank of Australia dipped 1.8 per cent to A$69.93. Westpac fell 3.5 per cent.
A macro-filled day today as the RBA release their Cash Rate Target, Trade Balance, Retail Sales and CoreLogic House prices are also released today. BWP Trust FY Earnings are also released today.
Beyond Meat and Walt Disney Inc will report earnings tomorrow. Walt Disney's earnings will give perspective to investors on how bad the closure of their theme parks has been for their bottom line. Investors will also be interested in the growth of Disney+ and competitiveness with rivals Netflix and Amazon. With multiple facets of their business being severely affected by Covid-19, volatility may be high if they miss expectations, as investors that held the stock see little sign of recovery in the near term.
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. Full disclaimer available at: https://www.jarden.co.nz/limitations-and-disclaimer