Global markets were mostly up overnight as US stocks climbed higher (S&P 500 Index +0.8%) to move into positive territory for the year. The technology sector was the strong performer, led by Amazon and Microsoft as investors continued to remain upbeat amid promising trial results for covid-19 vaccines, which offset a continual rise of case numbers.
Closer to home, parts of Australia are having challenges fully containing the virus with Victoria in lockdown, and cases emerging in NSW prompting the possibility of reintroducing restrictions to contain a rapid virus spread.
The Morrison government announced it will extend the JobKeeper and JobSeeker support measures for another 6 months, although both could be reduced under the Treasury's discretion. Payments are to be slightly reduced with fresh eligibility tests for the JobKeeper scheme in order to target those who need it the most.
Sydney Airport limited (SYD:ASX)
Sydney Airport (SYD) shares were down yesterday after announcing a weak set of passenger numbers for the month of June. A total of 172,000 passengers passed through its terminals during the month, which is down 94.9% on the prior corresponding period’s ~3.4 million passengers. While domestic numbers for the month of June have increased compared with April and May, the uptick is still fairly limited and the Airport is expected to continue to see heavily reduced passenger traffic over the interim as domestic and international travel restrictions persist.
Controlling covid-19 cases in Australia (particularly Victoria and NSW) are the major ways to improve sentiment as it allows unrestricted domestic travel and opens up the possibility of a trans-tasman bubble, which is starting to appear more likely to commence next year as opposed to the previously optimistic chance of a bubble by September 2020 (in the absence of a vaccine of course).
We maintain our BUY rating on SYD due to its valuation as a tourism turnaround play and strategic piece of infrastructure, but are wary of the possibility of a capital raise around the corner should travel restrictions (particularly domestic) remain in place longer than anticipated.
Australia & New Zealand Market Movers
The Australian market was down on Monday (ASX 200 Index -0.5%) as the outbreak in Australia continues to add to concerns over the worsening situation in the US, creating a cloud of uncertainty on Australia's economic outlook.
The banking and energy sectors were hardest hit being most sensitive to economic activity, ahead of Australian government's announcement regarding an extension of JobKeeper and JobSeeker payments as well as Reserve Bank commentary on the labour market and public balance sheet.
Buy now, pay later shares helped the tech sector end in the green with Afterpay leading the pack gaining +3.2%, while Payments and finance provider FlexiGroup told investors that a string of retailers and vets would now offer its buy now, pay later platform Humm.
The New Zealand market fell yesterday (NZX 50 Index -0.3%) as investors readjust their expectations of a "quick" global economic recovery, as cases continue to surge offshore at a considerable cost to the economy and delay "business as usual".
Despite being relatively immune to covid-19, Pushpay shares led the market lower yesterday down -4.1%, following some profit taking after the company announced Justine Smyth resigned as an independent director with immediate effect.
Many other better performing and higher valued shares were lower yesterday with the likes of Fisher and Paykel, Ebos, A2 Milk and Mainfreight edging lower. On the flip side, energy sector were mostly up as investors look to readjust their positions accordingly, adjusting in response of the Tiwai aluminium smelter closure.
3 Things Markets Will be Watching this Week
- Covid-19 newsflow around a second wave and re-opening of economies remains top of mind
- It is going to be another huge week ahead for corporate earnings with Amazon, Microsoft and Tesla all scheduled to report.
- Locally, Oceania Healthcare will release full year earnings, Sydney Airport will provide a quarterly update and production reports are due from BHP, Evolution Mining, Oil Search, South32, OZ Minerals, Beach Energy, Lynas, Northern Star, Newcrest Mining and Santos.