Global markets were mixed overnight (S&P 500 index -0.3%) with the US technology Nasdaq index in positive territory. Early in the day, US equities sank as data showed the US economy had its sharpest contraction on record (2nd quarter GDP -34.5% annualised, although this was largely expected), while the number of Americans filing for unemployment benefits rose. President Donald Trump raised the notion of delaying the 3 Nov election until after the coronavirus pandemic eases.
However, the big news came after the close of normal trade, as the tech titans released quarterly results, with Apple and Amazon jumping +6% and +5% respectively.
Apple delivered blowout earnings, with strong iPhone revenue despite COVID-19, reporting year-on-year revenue gains across every category and in every geography as consumers working and learning from home turned to its products and services. Amazon posted the biggest profit in its 26-year history as online sales and its lucrative business supporting third-party merchants surged during the coronavirus pandemic. Alphabet sales dropped for the first time on Google ad cutbacks in pandemic, but the decline was less than expected by the market.
Macquarie (MQG:ASX)
Shares in Macquarie Group were higher yesterday even as it said the global economic outlook still uncertain due to coronavirus pandemic.
Operating net profit for the first quarter of the financial year had dropped from the same time a year ago, with markets remaining volatile and bad loans rising. The trading update highlighted the annuity-style businesses were up on the 1st quarter of 2020 and markets-facing businesses were down. MQG has a strong capital position with a capital surplus of A$8.1bn at 30 June.
We remain BUY rated on MQG as our top financial sector exposure. Macquarie offers a more diversified income stream over the big 4 Aussie Banks with top quality assets and infrastructure investment in long term themes we like such as data and renewable energy.
Australia & New Zealand Market Movers
The Australian market was higher yesterday (ASX 200 Index +0.7%) despite the record number of new coronavirus cases and tougher restrictions announced in Victoria and the growing risk of a new outbreak in Queensland.
Tech stocks were the standouts with Wisetech leading gains on the back of a broker initiating a buy rating, while resources companies also performed strongly. Fortescue Metals saw record iron ore shipments of 47.3 million for the June quarter as China's economy rebounded from the coronavirus pandemic. Rio Tinto reported a 20% fall in profit, however its iron ore division propped up the company's result with strong volumes and a very health profit margin. Iron ore prices have lifted back above $US110 a tonne thanks to stronger demand in China.
TPG Telecom shares were up as the Federal Court dismissed an appeal by the consumer watchdog, the Australian Competition and Consumer Commission, against telecoms firm TPG in relation to the marketing and sale of some prepaid internet, home telephone and mobile plan.
Jetstar is increasing its domestic NZ schedule for August with a move back to ~90% of pre-Covid levels with the group CEO noting that flight bookings exceeded expectations in the first month of flight resumption in NZ
The New Zealand market rallied on Thursday (NZX 50 Index +0.8%) led by gains from blue chip stocks.
A strong trading update from Mainfreight for the first 17 weeks of the 2021 financial year despite COVID-19 saw it rally. The update was driven by market share gains in Australia and improvement in NZ – with the trading period including almost all of the impact of lockdown in the core NZ 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
- 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.
- Trade tensions with China look to be escalating once again.