Global markets were mixed overnight, with European markets selling off sharply while the US market ended the day up +1% (S&P 500 Index). Markets are dealing with renewed worries about China-US trade relations and fears of an extended economic downturn due to the virus outbreak.
Closer to home, the big news was the New Zealand government revealing a budget with a $50 billion covid-19 recovery fund to soften, but not prevent, the coming recession.
Construction ($5bn on housing) and infrastructure (another $3bn for projects) are the sectors most impacted with large spend on housing and infrastructure, which could potentially benefit the likes of Fletcher Building.
The crippled tourism sector was allocated $400m, largely for promoting domestic tourism and criticised for not being enough. In saying that, there could be further support (with $20bn still unallocated) and the wage subsidy has been extended. The likes of Air NZ and Tourism Holdings may see some marginal benefit to the extent domestic tourism promotion is successful.
Xero shares dropped yesterday after releasing a solid result, but one that did miss market expectations.
A 30% rise in revenue helped Xero swing to a $NZ3.3 million full-year net profit from last year's $NZ27.1 million loss. Full-year revenue rose to $NZ718.2 million as subscribers to its accounting software jumped 26% to 2.28 million.
The bears will point to a lack of forward guidance, combined with negative commentary on slowing subscriber growth and a negative business outlook from customers. In saying that, the result was impressive with improved margins and there still looks to be a path for material double-digit user and revenue growth globally.
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