Global markets took a breather overnight from the spectacular rally experienced in April (S&P 500 -0.9%). All major sectors were in the red, although the technology sector once again held up in a relative sense with strong results from Microsoft, Facebook and Tesla which all limited losses on the Nasdaq.
Weak economic data overnight included a larger-than-expected jump in US unemployment claims (3.8 million for the week), taking the total to over 30 million people since the US covid-19 lockdown began.
European stocks fell amid a barrage of bad economic readings and after ECB President Lagarde noted the Euro-area economy could shrink 12% this year.
ANZ Bank (ANZ:ASX / ANZ:NZX)
The big stock news in Australia yesterday was ANZ's interim results as it deferred a decision on its dividend after reporting a 51% drop in first-half profit, due largely to a A$1.03 billion provisioning charge for covid-related bad debt.
It was a mixed result from ANZ and there is clearly dividend uncertainty, although ANZ appears in a slightly better position relative to big 4 bank peers. As we mentioned earlier in the week, we are cautious towards the banking sector, and lowered our ratings on the banks generally. The economic uncertainty is likely to mean more bad debts for the banks, and low interest rates mean margins are small.
We will be releasing a full ANZ update in our weekly report.
Australia & New Zealand Market Movers
The Australian market rallied yesterday (ASX 200 Index +2.4%), rising to a six-week high as it extended its rebound, capping off its best month since 1988.
Woolworths dipped after warning of a cost blowout despite soaring sales, which had risen 10.7% in the March quarter. Offsetting this have been big monthly losses being incurred by its hotels business.
TPG Telecom shares dropped after the Singaporean government rejected its bid to be one of the city state's two 5G wholesale providers.
Mining major Fortescue released strong march quarter production, and is on track for record shipments for the 2020 full year.
The New Zealand market was lower yesterday (NZX 50 -1.3%) as investors banked profits from outperforming stocks
Deputy PM Winston Peters has suggested the government may take a greater stake in AIR and radically shake up the company, noting it has switched between privatisation and some level of nationalisation since 1989. He suggested the loan to AIR from the government carried an equity provision, which allows the government to increase its current stake from the ~52% currently, which could be triggered if it wished.
In other major news, the RBNZ has removed mortgage LVR restrictions for 12 months to support borrowers, noting that all local banks were in favour of the move.
3 Things Markets Will be Watching this Week
- Covid-19 and lock-down news-flow remains key in terms of market moves.
- US investors gear up for one of the busiest weeks of quarterly earnings reports, including from tech titans Apple and Microsoft. Closer to home, ANZ will continue a much anticipated reporting season for the banks with its 1st half result on Thursday.
- The US Federal Reserve makes an announcement on Thursday morning (AU/NZ time).
Have a Great Day,
