Global markets were mixed overnight, as US stocks fell (S&P 500 Index -0.9%) after a strong start to early trade to briefly reaching one of its highest levels since February 25. Predominantly the tech stocks which had outperformed in recent months gave away some gains, with the likes of Amazon, Microsoft, Nvidia Facebook and Tesla all ending the day lower after initially surging higher.
Shares of German biotech firm BioNTech jumped over 10% and Pfizer climbed 4% as two of their experimental covid-19 vaccines received the US FDA’s “fast track” designation, which seems to be offsetting concerns regarding continuously high covid cases being reported in the US, with Florida reportedly moving back to lockdown restrictions.
Treasury Wine Estates (TWE:ASX)
Shares in Australian Winemaker Treasury Wines Estate (TWE) were lower last week after providing weak market update guidance for the 2020 financial year, reflecting the challenging its business faced amidst the covid-19 pandemic. The company now expects earnings (EBITDA) to come in between $530m and $540m, which is down -21% from the previous year due to a decline of 14% in Asia, 37% in the Americas and 16% in Australia and New Zealand. Due to the uncertainty caused by the pandemic, TWE did not provide guidance for the 2021 financial year.
We believe the covid-19 impacts are largely temporary and one-off and currently priced in. We anticipate a slow multi-year recovery once the US market stabilises – but it does come with some risk.
We have a high-risk BUY rating on TWE, and will be updating it on our weekly report.
Australia & New Zealand Market Movers
The Australian market was higher on Monday (ASX 200 Index +1.0%) as markets ignore a spike in COVID-19 infections and instead focus their hopes on positive news regarding a drug to combat the virus by Gilead. With Victoria in full lockdown, NSW have announced some tighter restrictions on pubs and large venues with the government remaining committed to keeping the economy open.
The major banks are economically sensitive stocks and were higher, with the energy sector amongst the best performing as oil prices rose over the weekend. These gains were offset by the tech sector selling off after a strong run last week led by Afterpay's capital raise.
The New Zealand market edged higher yesterday (NZX 50 Index +0.4%) joining an Asian dominated rally, lifting investor sentiment led by optimism for a possible covid-19 treatment.
Summerset and Oceania Healthcare both rose, as investors wanting exposure to the retirement sector shifted holdings from Metlifecare following their recent takeover bid, with Oceania viewed as the more attractively priced in the sector.
Spark continues to climb higher, as income investors shift away from the power-generators, following last week's Tiwai closure announcement. As covid-19 cases in Australia (particularly Victoria) continue to flare up this putting pressure on travel related stock which saw Air NZ, Auckland International Airport and Tourism Holdings all edge lower yesterday.
3 Things Markets Will be Watching this Week
- Covid-19 newsflow around a second wave and re-opening of economies remains top of mind.
- A huge week ahead for earnings in the US with JPMorgan, BofA, Citi, Morgan Stanley, Goldman, Microsoft, Netflix and eBay all scheduled to release earnings.
- Locally, Australia’s employment data will be released along with the latest inflation and Net Migration data in NZ.