29 July 2020 Market Jitters | Air NZ Passenger Update

29 July 2020

Global markets were mixed overnight as the US market closed lower (S&P 500 Index -0.7%) as investors remain wary over weakening consumer confidence, disappointing earnings results, and wrangling in the US Congress over a covid-19 aid plan.

The big technology names slipped ahead of a massive day for earnings on Thursday. The first of the
major earnings releases for the week kicked off poorly as 3M and McDonalds fell after reporting weaker than expected results, with a larger than anticipated drop in revenue. Data released in the morning showed US consumer confidence eased back in July as covid-19 infections flared up across the country with Florida reporting a record one-day rise in deaths, and Texas passing 400,000 cases.

Members of Congress are sparring over a $1 trillion aid proposal from Senate Republicans announced on Monday, which may fall short of what is required to re-jolt the economy, four days before millions of Americans lose unemployment benefits. 

Air New Zealand Limited  (AIR:NZX / AIZ:ASX)
Air NZ (AIR) shares were a touch higher yesterday, after reporting slightly better than expected operating stats for the month of June, suggesting cash losses may not as bad as anticipated.

Air NZ carried 430,000 passengers in June, which is down -74.2% from the same corresponding period last year (the fall largely attributed to international travel bans), while domestic passenger numbers fell -62.6% cushioned by local tourism demand. For the full financial year, total passenger numbers have fallen -23.8%, and domestic are down 23.4%, with 7-8 months of normal operations.

We continue to remain SELL rated, as the airline continues to face significant losses while international travel is still heavily restricted with no near-term signs of easing. We still believe AIR will have to raise capital from shareholders.

Australia & New Zealand Market Movers

The Australian market dipped lower on Tuesday (ASX 200 Index -0.4%) as investor sentiment continues to drag down on the market after Victoria announced another 384 cases (NSW with 14) with the state-wide lockdown creating a cloud of uncertainty around the recovery in the Australian economy. 
A drop in gold prices saw miners of the precious metal lose some of their Monday gains, while there was broad based selling with almost all sectors down as well as reliable blue chips dragging the market lower – such as the major banks, Aristocrat, Sydney Airport, CSL, Wesfamrers, and Afterpay.

The major miners were among the select few to end the day up, BHP up +1.7%, Fortescue Metals up +3.2%. Rio Tinto climbed up +1.2% after announcing it would accelerate its development plans for the copper-gold Winu mine in Western Australia. 

The New Zealand market was marginally lower yesterday (NZX 50 Index -0.1%) as market sentiment became wary of a heavy correction ahead of earnings results for some major US companies this week, with a mixed bag of trading for the day. 

Vista Group led the market rising strongly up +7%, while Pushpay was up +3.1% as investors snapped up the church payment processing company after slipping heavily after reaching record highs about a month ago.  Auckland international Airport was hardest hit, down -1.6%, on the flip side Air NZ and Tourism Holdings were both up marginally.

Argosy property fell -0.4%, despite announcing it expected to match last year's 6.35 cent per share dividend, on the strength of its resilient portfolio through the global pandemic. Spark shares rose, as it edges closer to record highs, while the gentailers pulled back.


3 Things Markets Will be Watching this Week

  1. ​​​​​​​​​​Covid-19 newsflow around a second wave and re-opening of economies remains top of mind
  2. Reporting season continues with a bumper round of earnings this week with 193 S&P 500 companies reporting including Apple, Amazon, Facebook, Exxon Mobil, Chevron and GE. US 2nd quarter GDP and the latest Federal Reserve rate decision are also due. 
  3. Trade  tensions with China look to be escalating once again.
Global markets were mixed overnight as the US market closed lower (S&P 500 Index -0.7%) as investors remain wary over weakening consumer confidence, disappointing earnings results, and wrangling in the US Congress over a covid-19 aid plan.

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