Global markets were mixed overnight with the US market (S&P 500 +0.6%) a touch higher, as tech stocks Amazon and Netflx jumped to new all-time highs (both benefiting from the lockdown as "stay at home business"). US markets shrugged off weak unemployment data as jobless claims topped 5.2m for the week, with the covid-19 pandemic now erasing a decade of employment gains.
The rally in big technology names has been huge, with the Nasdaq 100 index (100 biggest technology stocks in the US) now flat for the year. In contrast the Russell 2000 index (the next 2000 companies on Wall Street after the 500 largest) is still down -30% year to date.
Trump is currently announcing new guidelines for states to follow which would allow them to reopen the country, while New York governor Andrew Cuomo has extended its strict statewide lockdown until May 15, adding another two weeks.
Retirement village operator Summerset shares have rebounded, despite reporting soft first quarter sales activity as it was hampered by one week of lockdown. Resales activity remained robust up +7.6% from the same corresponding quarter last year, as new sales were helped by availability of newly completed units. Summerset adding it is still too early to tell the impact of covid-19 for the second quarter, but they are in a strong financial position with close to $400m of unutilised funding capacity.
We have downgraded SUM to a HOLD, given the direct risk covid-19 has on its business as well as a predicted downturn in the housing market which will impact pricing and earnings.
Unlike before, we aren't comfortable paying a premium for SUM given it trades above its most recent net tangible asset per share of $5.02 given prevailing risks.
Australia & New Zealand Market Movers
The Australian market dipped lower (ASX 200 -0.9%) yesterday after a mixed reaction towards how restrictions could be eased given Australia's efforts to contain the pandemic have produced encouraging results so far. There is a cloud of uncertainty over the outlook of the economy with earnings season dragging the market lower which saw miners slip, with consumer discretionary being the worst performer given underlying pressure on households.
Heavily beaten down casino stocks like Crown were up slightly on optimism that public spaces may open sooner to the local public, and the hotel and casino operator also announced it has debt facility to survive an extended period of closure and construction of its Sydney hotel and casino complex will continue as planned, while fully or partially standing down 95% of its workforce (11,500 staff) to mitigate the cash burn.
Capital raises continue as funeral operator Invocare, announced successful $200m from institutional investors, with a further $50m to be raised from eligible retail investors. New shares are on offer at $10.40 each as it attempts to shore up its balance sheet and deals with limited services due to restrictions on social gatherings including funerals.
The NZ market continues to climb higher (NZX 50 +0.6%) for a third day in a row, as confidence continues to build on easing lockdown measures with level 3 which is yet to be decided on allowing the economy to partially open. This includes some forms of construction, drive through and delivery services and businesses with no-contact with customers (so retail, cafes and bars would still remain closed).
Interestingly Air NZ led the market higher despite its business not being able to operate any differently under level 3. Auckland International Airport shares were a touch lower after reporting passenger numbers had fallen 42% percent in March and warning the April numbers would be even worse due to the national lockdown, which came as no real surprise.
3 Things Markets Will be Watching this Week
- Coronavirus related news-flow remains key in terms of market moves.
- US corporate earnings season kicks off this week.
- Capital raising announcements by companies are growing as companies ask for cash from investors in this uncertain period.
Have a Great Day,