Blue Sky Territory | Auckland International Airport

2 July 2021

Global stocks were mostly higher overnight, as US markets (S&P 500 index +0.5%) started the second half of the year strongly, with sound jobs and manufacturing data creating optimism extending the recent rally to a 6-day win streak. 

US weekly jobless claims dropped to the lowest level since the start of the pandemic coming in at 364,000 and manufacturing growth was lower than May but still robust. All sectors were in the green, with Energy stocks leading the way as West Texas Intermediate crude rose above $75 per barrel, while the tech sector reported the smallest gain as investors took profit from high growth names.

Apparel company Nike was another winner, rising more than 2%, and shares of Walgreen Boots Alliance fell more than 7% despite releasing a better-than-expected earnings report.

European stocks (Stoxx 600 index +0.6%) were stronger overnight. Gains supported by OPEC+ producers leaning towards smaller expected increases in oil production for the remainder of the year, boosting energy stocks. Travel and Leisure stocks jumped +2.6% after Prime Minister Boris Johnson announced that full vaccinated citizens are able to travel abroad this year.

Auckland International Airport (AIA:NZX)

Auckland Airport (AIA) fell -0.7% yesterday after providing a unflattering trading update.
AIA stated that the covid-19 outbreak in Australia and pause in trans-Tasman bubble is denting passenger confidence which may take longer than expected to repair, and that it expects 2021 full year net loss to still be between $35m and $55m. Adding that oversees examples show a sustainable recovery in travel will be linked to a robust vaccine roll-out which has been slow in Australia and New Zealand. 

We continue to view AIA positively and as better positioned to benefit from the recovery in international travel, and are in a much better position financially than airlines.

The road to recovery appears to be more rocky than anticipated we and expect further volatility for the stock especially at current valuation over the interim and transitory phase in the next couple of years – dependant on when and how the NZ government decides to reopen borders to other countries and allow international travel to recommence in a near-normal level. We maintain our BUY rating on AIA and encourage patient investors to average into their positions and buy at any "dip" opportunity that may arise with a medium to long-term investment horizon in mind. 


Australia & New Zealand Market Movers

The Australian market fell yesterday (ASX 200 index -0.7%) as investors looked to reposition their portfolios for the start of the Australian financial year.
It was broad based declined with 10 out of the 11 sectors in negative territory, consumer discretionary losing the most ground, followed by consumer staples. Materials was the only sector in the green, lifted by smaller miners 

The New Zealand market edged higher on Tuesday (NZX 50 index +0.2%).
Property related stocks performed strongly, after expectations that the strong economy and low interest rate will keep house prices elevated until 2022. Argosy Property led the market higher up +4.5%, followed by Stride property, with retirement village operators also performing strongly.
Air New Zealand shares surprisingly jumped +1.3% after releasing their operating statistics which showed it carried 101,000 people across the Tasman during May, and 844,000 passengers in total. 

3 Things Markets will be Watching this Week

  1. Key events this week include US monthly nonfarm payrolls data, the latest US ISM Manufacturing print, an inflation CPI print for the Eurozone.
  2. In Australia, covid-19 related developments are back in focus with recent lock downs and heavy restrictions.
  3. In NZ, Sky TV will be holding an Investor Day, and AGM's are scheduled for Argosy and Arvida.
Global stocks were mostly higher overnight, as US markets (S&P 500 index +0.5%) started the second half of the year strongly, with sound jobs and manufacturing data creating optimism extending the recent rally to a 6-day win streak.

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