Global markets plunged overnight, as the corona-virus outbreak continues to spread rapidly, with a full blown oil price war adding fuel to the fire as oil prices fell another -24%, (following a -10% fall on Friday) the largest fall since the Gulf War in 1991.
The US market (S&P500) fell -7.6% overnight, with markets temporarily halted for 15 minutes after a -7% fall in early trade triggered a circuit breaker to prevent a heavy crash. Losses were felt across all sectors, with energy leading the way down -19.7%, while financials were beaten down losing -11% in value. European markets were also hit heavily down -7.4% overnight, falling the most since 2016, while Asian markets fared marginally better falling between 4-5%.
Stock in Focus: Air New Zealand (AIR:NZX / AIZ:ASX)
Shares in AIR descended further yesterday down to three-year lows, after withdrawing its 2020 full-year guidance which was released only a couple of weeks ago. The airliner stated demand continued to weaken further than initially anticipated due to the global outbreak of covid-19, and in response will be reducing overall capacity by approximately -10% across the whole network, and a -26% reduction in capacity on Asia routes through til June.
Air NZ are also adopting various labour initiatives to mitigate the risk, including a voluntary reduction in CEO pay, hiring freeze and voluntary unpaid leave for operational staff.
While trading at an attractive face value valuation, under normal conditions we would be comfortable with our High-Risk BUY rating on Air NZ. 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 covid-19 related risks to subside.
Members should look out for a full update on AIR to be released in our weekly report
Australia & New Zealand Market Movers
The Australian market (ASX 200) plunged -7.3% yesterday, its worst day of trade since the global financial crisis wiping $137 billion from the value of shares. The moves in oil prices only magnified a market already rattled by rising concerns about the threat to global consumption and business earnings as the economic fallout from COVID-19 outbreak gathers pace.
Loses were felt across every sector, with the energy sector leading the losses slumping -20% as oil prices tanked, while heavy losses where felt across financials, tech and materials.leading bluechips were also hit with BHP Group shedding -14.4% given its oil exposure, and healthcare darling CSL lost -5.9%.
The NZ market (NZX50) fell -2.9% on Monday, faring a bit better than other markets given its lower exposure to oil prices, but investors fled stocks and dividends in favour of safe-haven assets in times of market volatility. Pushpay led the market lower, as investors seek to reduce their risk exposure, while travel and tourism related stocks like Air NZ and Auckland International Airport also slid. The traditionally safe power-generators were also caught up in heavy sell-off.
It wasn't all doom and gloom, as Fisher and Paykel healthcare posted the biggest gain climbing +4.2%, on a weakening kiwi, as most of its income is derived in the US and the demand for its products unphased.
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,