Global markets were lower overnight (S&P 500 Index -0.3%) as Technology shares led US stocks lower for the first time in three days, with investors continuing to rotate out of this year’s top performers – particularly the major Technology businesses.
In breaking news this morning, Netflix has fallen -10% in after hours trade, as the streaming company released a result which failed to meet the markets lofty expectations. Keeping in mind the stock has experienced a remarkable run, Netflix added 10.1 million streaming subscribers from April through June as the coronavirus forced people around the world to shelter at home. However, For July through August, Netflix forecast it would add 2.5 million new paid streaming customers around the world – much lower then analysts on average who expected a projection of 5.3 million.
In other news, Asian shares were lower as Chinese retail sales in June came in softer than expected, even as the economy returned to growth last quarter. The economic data from China serves as a reminder of the potentially long road ahead to a full global recovery.
Delegat Group (DGL:NZX)
DGL shares were higher yesterday as the winemaker released another operating profit upgrade (+3% higher than market consensus) with strong UK and North American sales and a large harvest supporting profitability.
DGL announced operating profit of NZ$60.8m for the 2020 financial year, +20% on last year, and a further +3% upgrade to consensus estimates following an upgrade only 3 weeks ago. Wine sales were up +9%, in line with previous commentary, reaching 3.3m cases for the year ended 30 June. Strength from the UK market (+28% sales growth) was the largest driver of profit growth, while US sales were up +13%.
The recent upgrade supports our positive view on DGL and BUY rating.
Australia & New Zealand Market Movers
The Australian market was lower on Thursday (ASX 200 Index -0.7%), closing in the red after initially opening higher, with healthcare and utilities stocks dragging on the market.
Victorian Premier Daniel Andrews announced late in the morning that Victoria had suffered 317 new COVID-19 cases, news that was followed by the June labour force report. Australia’s unemployment rate rose to a two-decade high in June as a gradual easing in coronavirus-related lockdowns encouraged more people to look for work. Unemployment rose to a seasonally-adjusted 7.4% (versus expectations of 7.3%), figures from the Australian Bureau of Statistics showed on Thursday, with another 69,300 jobs lost during the month. The bigger concern is what the actual jobless rate is, adjusted for the government's wage subsidy and other factors.
In stock news, shares in Perpetual rose after the investment services company reported a lift in funds under management and growth in its private and corporate trustee segments in the June quarter.
The New Zealand market sold off yesterday (NZX 50 Index -0.9%) snapping a three-day rally, as investors grew concerned about deteriorating US-China relations and the economic cost of a resurgence of covid-19.
Outside the top 50, Michael Hill International rose 9% as the company a reported a robust return to trade with adjusted same-store sales for the quarter down just 4.1% percent against prior year. Investors also looked past a fourth quarter sales drop to focus on strong online sales.
For Michael Hill and retailers generally, we expect a more challenging consumer environment once government support measures cease, on top of existing competitive pressures in the Australasian market.
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.
