Global markets were mixed overnight as the US market (S&P 500 +0.8%) rallied, led by the tech sector which continues to be relatively immune to the news that covid-19 cases in the US continue to rise at a record pace and concerns around further lockdowns.
Apple rose to new record highs, while Microsoft, Netflix and Amazon were also higher as their businesses either directly benefit or are relatively immune to the threat of further lockdowns and their strong balance sheets make them a relative safe haven. The big 5 technology companies now account for approximately 50% of the US Nasdaq index and 22% of the S&P 500 market index.
Other parts of the market were lower, particularly ones which benefit from the economy fully opening, with United Airlines down after announcing it could lay off up to 36,000 employees (half its US workforce) due to covid-19.
Select Harvests (SHV:ASX)
Shares in Almond producer Select Harvest were down -2% yesterday after releasing a crop and market update. SHV announced it has completed its 2020 crop, with overall quality good however partially impacted by late harvest rains and wet weather. Shipment levels are slowly returning to normal levels after a challenging period over March and April, with demand continuing to remain strong particularly from China remaining stable.
However the US crop for 2020 is estimated to be 3.0 billion pounds, larger than anticipated, with the US likely to engage in some aggressive selling due to limited market access, putting some price pressure on the market over the near-term. 80% of SHV's 2020 crop is committed at the range of A$7.25/kg to A$7.75/kg, but there could be some pricing pressure over the near-term although demand continues to remain firm so it should be fairly limited.
We have a High Risk BUY rating on SHV
Australia & New Zealand Market Movers
The Australian market fell again on Wednesday (ASX 200 -1.5%) as the market continues to absorb the news of Melbourne's 6-week lockdown, weighing down on investor confidence.
The Banking sector was heavily hit given the importance of Victoria to the overall Australian economy, with lower consumer spending, less business investment and more job losses, indicating that even with additional Federal support there may likely be no sharp "V-shaped" recovery for the Australian economy.
Given the negative outlook, investors shifted their focus to gold miners as a safe haven amidst economic uncertainty for the Australian economy. While supermarket giants Coles and Woolworths rose as lockdown for Victoria meant more supermarket spending for the state. Afterpay shares returned back to trading following its $650m capital raise to ease down -2.9% to Tencent's offer price of $66 per share.
The New Zealand market fell yesterday (NZX 50 Index -0.3%), as investors weigh up the economic impact of Victoria's lockdown. This saw NZ shares with exposure to Australia sell off with the likes of Kathmandu and Fletcher building trading lower. Sky City shares fell despite not having a casino in Victoria after completing its $50m capital raise, while a weaker Australian economic outlook and delay in trans tasman bubble impacted sentiment.
This saw the lower risk and more stable power generators and Spark shares rise as investors favoured reliable dividends over exposure to the Australian economy.
3 Things Markets Will be Watching this Week
- Covid-19 newsflow around a second wave and re-opening of economies remains top of mind.
- The Reserve Bank of Australia makes an interest rate decision on Tuesday.
- Trade tensions with China remain a risk to keep an eye on.