Global markets were higher overnight (S&P 500 Index +0.8%) though the failure of Republicans and Democrats to secure a deal on more stimulus measures tempered Wall Street's advance.
Investors watched the first US Presidential debate closely yesterday, and after a messy debate it is hard to quantify the impact on markets, although polling in the wake of the debate showed that the odds of Joe Biden winning increased. Concern is rising around having a clear election winner in November due partly to so many mail-in ballots, which will take time to count. This is setting the scene for months of political uncertainty and distraction post the early-November election. We would see an election related sell-off as shorter term in nature and a buying opportunity rather than reason to panic.
Markets have finished off the September quarter fairly flat, with more volatility experienced in the US, while the NZ and Aussie markets have traded in a sideways range.
Air New Zealand (AIR:NZX / AIZ:ASX)
At its Annual Shareholder Meeting this week, Air New Zealand (AIR) said it has drawn down NZ$110m of the government's funding facility (which is $900m in total at an interest rate of up to 9%) and suggests it will be "looking to go to the market in that early part of 2021" for an equity raise – which will likely be at a significantly lower price than where AIR shares are currently trading.
New CEO Greg Foran's strategy refresh outlined the company's five new key strategic pillars covering (1) people/culture, (2) customer experience, (3) customer loyalty, (4) digital, and (5) sustainability.
AIR's cash burn Average monthly cash burn guidance remains at NZ$65m–NZ$85m, and yet the share price remains relatively high.
While there are now suggestion that some sort of trans-Tasman bubble could emerge before Christmas, the situation remains very uncertain.
We remain SELL rated on Air NZ and will release a full update in our weekly report.
Australia & New Zealand Market Movers
The Australian market sold off on Thursday (ASX 200 Index -2.3%) as every ASX sector experienced heavy falls on Wednesday with oil stocks leading the losses.
Santos shares dropped -4%, despite NSW planning authorities approving the company's controversial $3.6 billion Narrabri coal seam gas project.
In a sea of red, Corporate Travel Management was the best-performing stock, surging 9% as the travel agency said it had raised $262 million, by issuing 18.9m new shares to big institutional investors. It also hopes to raise $113m by issuing more shares to retail investors. The money will be used to fund its takeover of US-based Travel & Transport, for $282m. Meanwhile, its excess funds will be saved for "balance sheet flexibility" (a rainy day) as the travel industry struggles to stay afloat during the COVID-19 crisis.
The New Zealand market (NZX 50 +0.04%) was flat yesterday, with a rally in the property sector offset by A2 Milk Company falling for a third consecutive session. Property stocks with exposure to the retail sector were the key gainers on the day, as investors saw potential for economic recovery underpinned by low interest rates.
3 Things Markets Will be Watching this Week
- COVID-19 related -flow remains key, with second wave and lockdown headlines, while US Congress debate what an extension of stimulus will look like.
- This week sees the first 2020 US presidential debate, monthly US employment data, and US 2nd quarter economic growth (GDP) data.
- Locally, NZ business and consumer confidence data and the latest building permits data will be released along with retail sales in Australia.
Team