Global markets were mixed overnight with US stocks (S&P 500 Index +0.6%) up higher on mixed quarterly earnings results and as negotiations for additional stimulus continued in the US. The package is expected to cost $1 trillion or more to extend current benefits which are due to expire in two weeks for millions of unemployed Americans.
On the covid-19 front, recent figures showed more than 1,000 deaths were reported in the US on Tuesday, with the number likely to surge as the crisis will worsen before getting better, as new daily infections continue to remain at heightened levels. Drug company Pfizer Inc gained 5.1% after the drugmaker and German biotech firm BioNTech announced the US government would pay $1.95 billion for 100 million doses of their covid-19 vaccine candidate, if it proves to be safe and effective.
BHP Billiton (BHP:ASX)
Shares in miner BHP Billiton were up when it announced a solid update for its final quarter (June) for the 2020 financial year, meeting its full year production guidance for all major commodities except petroleum due to lack of demand (created by covid-19). Iron ore production was 67Mt for the quarter, which was up +11% from the same corresponding period last year, while annual production was up +2%. The result was driven by strong demand for iron ore from China, allowing the group to benefit and capitalise on attractive iron ore pricing.
Management's guidance for 2021 appears a bit subdued, as a risk of a second wave of infections could have a potential negative feedback loop to China if the rest of the world economy was to slow down. However, if China can avoid a second wave of covid-19 then steel and iron production could have the potential to rise further in the remainder of the 2020 calendar year.
We maintain our BUY rating on BHP given its attractive dividend and as a diverse and efficient mining business.
Australia & New Zealand Market Movers
The Australian market slid on Wednesday (ASX 200 Index -1.3%), easing back after a strong Tuesday as some investors took profit. There were also virus related concerns around the outbreak locally, particularly in Victoria as cases continue to rise after reporting a daily record of 484 new cases creating more uncertainty. All sectors were down except energy, with gold miners and oil and companies bucking the trend, benefiting from favourable moves in their respective commodities.
Lynas shares were lower, as production levels for the June quarter were down -44%, due to forced shutdowns in operations in accordance with the Malaysian government, and eased production levels after in anticipation of weaker demand.
The New Zealand market was a touch lower yesterday (NZX 50 Index -0.1%) following a weak lead from Australia due to heightened concerns over rising covid-19 cases. Market heavy weights A2 Milk and Fisher and Paykel Healthcare were lower, as the two exports pulled-back as the kiwi dollar crept up to a 6-month high.
The Gentailers were down after Meridian announced electricity demand in June was -1.1% lower than in the same corresponding period last year. Z Energy posted the biggest gain, up +5.1% after a relativity positive first quarter update as it wins market share on retail volumes, but warned of considerably lower first-half operating earnings that were in line with expectations.
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.
