Global markets were higher overnight as market's recovered most losses from 'Black Monday', with the US market (S&P500) climbing up +4.9% after US President Donald Trump announced fiscal stimulus measures to curb the economic impact from the coronavirus with details to be confirmed by congress and released later this week. The wave of measures include payroll tax cut along with relief for hourly wage earners, and aiding ailing businesses like airlines, cruises, and hotel businesses which are most at risk from current Coronavirus containment measures as well as other SME.
Asian markers also edged higher, rebounding on the above announcement as well as reacting positively to Chinese President Xi visiting Wuhan for the first time since the outbreak, as the active number of cases in China start to fall.
The strong rebound does not mean the worst is over, with sharp movements the market is very sensitive and investor sentiment is fluid. We continue to watch developments as they unfold.
Stock in Focus: Qantas Airways (QAN:ASX)
Qantas updated the market on its efforts to curb weak demand by reducing capacity, highlighting cost savings from singifcnalty lower oil prices as well as having adequate cash-reserves and low levels of debt.
Qantas also withdrew its prior guidance for the 2020 financial year released a few weeks ago, as demand dropped significantly further than initially anticipated following the spread of the coronavirus into Europe and North America over the past fortnight. As a result total international capacity for Qantas and Jetstar routes will be reduced by 5% to 23% versus the same time last year and QAN will extend these cuts until mid-September 2020. As well as drastically reducing capacity Qantas are also adopting various labour initiatives to mitigate the risk, including the CEO taking no salary for the year, the board taking reduced fees, a hiring freeze and asking staff to take up paid or unpaid leave.
While trading at an attractive face value valuation, under normal conditions we would be comfortable with our High-Risk BUY rating on Qantas. However, we anticipate there will be more market related volatility over the near-term and would be more comfortable holding off buying at the moment and waiting for coronavirus related risks to subside.
Members should look out for a full update on QAN to be released in our weekly report
Australia & New Zealand Market Movers
The Australian market (ASX 200) closed +3.1% higher yesterday, rebounding from tough early trade, with the rally sparked by US President Trump fiscal stimulus plan to curb the economic effects on covid-19. This saw most sectors partially recovery some of 'Back Monday' losses, with financial leading the way followed by tech and materials. Woodside Petroleum rose +2.1 %, along with the rest of the energy sector as oil recovered slightly from Monday's crash.
The NZ market (NZX50) fell -1.8% on Tuesday, recovering from a sharper fall in early trade initially responding to heavy falls globally from 'Black Monday' and then recovered on Trump's stimulus plan. Fisher & Paykel Healthcare led the market lower, falling -4.5% as it was the only few companies to benefit from the outbreak, and traded higher since its initial announcement.
Air NZ and Tourism holding shares continue to slide further as investors digest news that tourism is likely to remain weaker with Air NZ's announcement to reduce capacity. A couple of big names such as EBOS, Mainfreight and Genesis edged higher, as investors decided to snap them up at relatively cheaper valuations.
3 Things Markets Will be Watching this Week
- Coronavirus related news-flow remains key in terms of driving investor sentiment.
- The European Central Bank holds a meeting on Thursday.
- Closer to home Aussie business and consumer confidence will be of interest while in NZ we have REINZ house sales on Tuesday.
Have a Great Day,