Global markets were lower overnight, US Markets (S&P 500 Index, -0.6%) ending its 4-day winning streak, as as hopes deteriorated around the speed of de-escalation in Ukraine, and investors assessed the risks to economic growth from accelerating inflation. In Europe, Germany triggered an emergency plan to brace for a potential Russian gas cut-off as Putin insists it should be paid for in Rubles.
The price of oil climbed more than 3% to top $107/barrel, seeing energy stocks lead gains on a risk off day and gold edging +1.1% higher. Consumer Discretionary and Tech shares lead losses. Lululemon Athletica surged +9.6% after the sports apparel company reported a stronger than expected profits, despite people returning back to the office, and announced upbeat guidance.
European markets (Stoxx 600 -0.7%) were lower on disappointing developments from Ukraine with retail stocks leading losses.
Air New Zealand (AIR:NZX / AIZ:ASX)
Air New Zealand shares were put into a trading halt yesterday after revealing its much-anticipated equity raise.
In total it will be a $2.2billion in recapitalisation, $1.2 billion in new equity, $600m by redeemable share issue to the Crown (treated as debt) and $400m in undrawn standby debt facility by the crown. The funds will be used to repay $850m crown loan and strengthen the balance sheet to provide adequate liquidity to prepare for AIr NZ’s rebound.
The $1.2bn equity raise will be structured as a 2-for-1 rights offer (increasing the number of shares 3-fold) at $0.53 per share. Air NZ expects 2022 full year loss to be below $800m, an upgrade from its previous guidance of above $800m. With borders et to reopen to traveller the air line anticipated to be operating cashflow positive in the September quarter, and with fleet optimisation revenue in 2025 to reach 90% of pre-covid levels.
We remain Sell rated on Air NZ as the stock is still overvalued and does not consider the implications of the current dilution as well as elevated jet fuel prices that will likely hurt margins over their near-term recovery.
Australia & New Zealand Market Movers
The Australian market was higher yesterday (ASX200 index, +0.7%) for a seventh consecutive day, helped by the Federal budget being well received to ease strain on consumers.
A strong lead from Wall street improved investor sentiment and saw tech stocks lead gains again, followed by healthcare. Retail stocks performed well as households were given $250 in cash handouts from the budget.
The New Zealand market was up on Wednesday (NZX 50 index, +1.5%) following a strong lead from Wall street, and the price of oil falling -7% giving investors increased confidence.
Fisher and Paykel Healthcare rose +4.3% as investors find a bottom, while a range of blue chips and beaten down stocks also made strong gains.
3 Things Markets will be Watching this Week
- Geopolitical risks remain extremely elevated with the Russia/Ukraine conflict.
- Highlights this week include US Non-Farm Payroll e,ployment data and China PMI report
- Locally, Australia will release their fiscal budget, and Synliat Milk reports its result.