US markets (S&P 500 Index +1.4%) rose strongly overnight on light trading, as market attention remains focused on Fed Chair Powell’s Jackson Hole address tonight.
Expectations are that the Fed will be aggressive with monetary policy going forward, to bring down inflation to its 2% target. US second quarter GDP was revised up slightly indicating a fell -0.6% year on year, less than -0.9% that was expected, and coming in better than the steeper -1.6% contraction in the first quarter. On the flip side, jobless claims data came in stronger than expected suggesting the US economy is still in a strong position (particularly the employment market) – giving the Fed extra capacity to continue its hawkish tilt.
The session saw all sectors rise, with materials, communication and tech leading gains, as the NASDAQ index rose +1.7%.
European markets (Stoxx 600 Index, +0.3%) closed higher, on a more mixed day of trade, with strong gains for oil and gas stocks offset by losses from retail stocks.
Qantas (QAN:ASX)
Qantas shares jumped +7.1 yesterday – it’s result was mostly in line with expectations, with revenue surging +53% to $9.1 billion while operating earnings (EBITDA) came in at $281m, down 31.5% from the previous year. This result takes the total statutory loss before tax impact of covid since the start of the pandemic on the Qantas to nearly $7 billion and a total revenue losses of $25 billion.
While international flights are recovering they are still at 75% of pre-covid levels, the road to recovery is still gradual, as the airline navigates labour shortages and fuel price headwinds. While Qantas couldn’t justify a dividend, they announced a $400m share buyback, partially offsetting the $1.4 billion capital raise to support the recovery plan at the start of the pandemic.
We are HOLD rated on Qantas, as we prefer to avoid the sector at current valuations, due to labour shortages restricting scale-up in operations and jet fuel price headwinds impacting margins.
Air New Zealand (AIR:NZX)
Air NZ shares fell -1.5% on their result which was inline with guidance loss before tax of -$725m, its largest in history.
Looking ahead Air NZ expects total capacity to reach 80-85% of pre covid levels, with Trans Tasman and Pacific closest to full recovery, while long-haul to still lag at ~65% of pre covid capacity.
Air NZ are citing costs headwinds being a major issue towards recovering profitability.
We are Sell rated on Air NZ, as mentioned above we do not like the industry and secondly its highly dilutive capital raise makes it ‘overvalued’ in our opinion.
Australia & New Zealand Market Movers
The Australian market (ASX 200 Index, +0.7%) was up yesterday as uranium stocks outperformed on news Japan may restart its nuclear power plants to ease concerns about energy security.
It was another mixed day of earnings. Woolworths, another major retailer fell -3.2%, as its result was squeezed by cost inflation.
Flight centre fell -4.5%, after reporting a -$287.2m loss, despite having revenues recover strongly from the previous year doubling as boarders reopened.
The New Zealand market (NZX 50 Index, -0.2%) was down amidst a mixed-day earnings results.
Sky City fell -1.4%, as it closed off another challenging covid impacted year, operating earnings (EBITDA) of $138m were inline with previous guidance.
Sky TV shares rose +1.2%, as it announced a $70m share buyback programme and return of dividends, while content cost inflation continues to be an ongoing headwind.
Channel Infrastructure (previously known as Refining NZ) shares jumped +5.6% after delivering a solid first-half result with improved demand for fuels, with jet fuel demand reaching 50% of pre-covid levels, and the earnings outlook appears promising.
Things Markets will be Watching this Week
Monday
Australia: Earnings from Ampol, Cooper Energy, OoH! Media, and Star Entertainment.
New Zealand: Earnings from Freightways, Steel & Tube, and Property for Industry.
Tuesday
Global: US new home sales
Australia: Earnings from Ansell, Boral, Endeavour Group, Kogan, Scentre Group
New Zealand: Earnings from Heartland group, and Summerset.
Wednesday
Global: US Pending homes sales data, and Eurozone consumer confidence.
Australia: Earnings from Coles, Domino’s Pizza, G8 Education, Qantas, Tabcorp, and WiseTech Global.
New Zealand: Annual shareholder meeting by Fisher and Paykel Healthcare and earnings from Meridian Energy, Ebos and Spark.
Thursday
Global: US second quarter GDP and initial jobs claim data.
Australia: Earnings from Appen, Ardent Leisure, Blackmores, Costa Group, Flight Centre, and Pilbara Minerals
New Zealand: Retail sales data, and earnings from Air NZ, Sky City, and Sky TV.
Friday
Global: Japan CPI (inflation) data.
Australia: Earnings from Next DC, Ramsay Healthcare, and Wesfarmers
New Zealand: ANZ consumer confidence report, Earnings from Port of Tauranga, Tourism Holdings, and Delegat Group.
