Global markets were higher overnight, with the US markets up 3% despite negative pandemic news.
Markets as reacted positively to Johnson & Johnson announcing they potentially have a covid-19 vaccine which would be sold on a 'not-for-profit' basis. At the same time, Abbott Laboratories are launching a rapid testing kit which is the size of a toaster which would take five-minutes, adding to some optimism to markets during this terrible pandemic.
Closer to home, the Australian market surged +7% on the back of a massive $130bn government support package.
Stock in Focus: Sky TV (SKT:NZX / SKT:ASX)
Sky TV shares continue to plunge, as they withdrew their 2020 full year guidance due to increased uncertainty surrounding the Covid-19. Despite being a stay at home product which should benefit from large scale lockdown like Netflix has, the major concern is its core sporting sporting content as major sport leagues become cancelled in an attempt to combat the spread of covid-19.
While the company has options to recover some costs associated with sports content rights, its sporting content plays a crucial role in maintaining its high valued satellite subscribers, as well as a drop off in advertising revenue as economic conditions remain challenging with businesses cutting costs. Given their shrinking business there are concerns surrounding their debt levels, especially if Sky TV start to enter into a potential cash burn situation in the near-term.
We currently have a Sell rating on Sky TV
Australia & New Zealand Market Movers
The Australian market recorded its best session since 1980 on Monday (ASX 200 index +7%), after the announcement of a giant $130 billion government stimulus package. This includes a wage subsidy of $1500 per fortnight payment to support employees for 6 months.
The stimulus buoyed investor sentiment across all sectors which were up, with healthcare being the top performer led by CSL which jumped +12%. Banking and retail also rebounded, and likewise the energy sector ended the trading day higher despite a slump in oil prices.
It has not all been bad news, with Data Centre operator Next DC shares having held up well in the sell-off, and surged to all-time highs after jumping +13.9% yesterday. In stock news, Wesfarmers announced yesterday it would sell its 5.2% (~A$1 billion) stake in Coles Group, in an attempt to strengthen their balance sheet during this difficult period as it deals with retail store closures.
The NZ market edged higher yesterday (NZX50 +1.1%) led by New Zealand's two largest companies Fisher and Paykel Healthcare (+6.6%) and A2 Milk (+2.8%). Both exporters benefiting from a weak kiwi dollar which is trading below 60 cents versus the US dollar, and are in some ways beneficiaries form the covid-19 outbreak. Property companies, particularly with the retail exposures were hit heavily with concerns over rental payments and store closures.
Tourism Holdings was the biggest loser down -10%, while Auckland International Airport dropped -5.3% giving back gains from late last week. Air NZ's CEO confirmed reports that already announced major job losses follow a revenue plunge from ~$6bn to ~$500m with over 95% of flights cut globally. He expects the airline to still be 30% smaller than where we are today from a staff perspective in one years’ time.
3 Things Markets Will be Watching this Week
- Coronavirus related news-flow remains key in terms of driving investor sentiment.
- Moves from central banks & governments globally in response to coronavirus,
- Key economic news events this week include the latest jobless claims data in the US along with nonfarm payrolls.
Have a Great Day,
