Global markets were higher overnight (US S&P 500 Index +1.0%) as optimism over potential medical advances in the war against the covid-19 pandemic.
This came after Food and Drug administration announced that it had given emergency authorisation for the use of blood plasma from recovered patients as a treatment option. The potential for fast-tracked covid-19 treatments lifted the mood of the market. Gains were experienced across the board but led by energy, financials and travel related companies that benefit from a more robust economy.
The market will pay close attention to US Federal Reserve Chairman Jerome Powell’s remarks on monetary policy at this week’s central banker meeting, as well as the Democrats and Republicans who remain at loggerheads over funding levels and unemployment benefits.
Closer to home, Jacinda Arden announced that Auckland will remain in level 3 lockdown for additional 4 days until Sunday, before moving down to level 2, and that the remainder of the country will remain at level 2 – creating some economic constraints.
Ooh! Media (OML:ASX)
Out of Home advertiser Ooh! Media (OML) shares surged up +17.5% yesterday, despite a weak result for the first half of the 2020 financial year. The result was largely expected, and OML provided promising trading data following the nationwide lockdown earlier this year. OML reported a net loss of -$27.5m, with an extremely weak second quarter which saw revenue slump ~60%. However revenues have since then have started to recover over August with forward bookings indicating further improvement.
Better than expected operating earnings and cash flow over the challenging first half as well as improved revenue limits the risk of potential debt covenant breaches, as well as another equity raise which were risks priced in earlier.
We remain HOLD rated on OML given the near-term uncertainty given the weaker state of the economy.
Australia & New Zealand Market Movers
The Australian market made modest gain on Monday (ASX 200 Index +0.5%),
Afterpay rose (+5%) to break into new all time highs upon agreeing to buy Spanish credit provider Pagantis in a deal worth at least €50 million ($82.4m), with rest of "buy -now-pay-later' stocks also edging higher.
Iron ore mine Fortescue also reach new highs (+3%) after announcing it will pay a $1 a share final dividend, beating market expectations with its annual results on the back of persistently strong iron ore prices and production which drove Fortescue's net profit up +49% cent higher to $US4.73 billion.
New Zealand shares were up (NZX 50 Index +0.7%) yesterday following a strong lead by US markets, mostly unphased by 4-day lockdown extension which may have surprised most.
Property stocks were mostly up, except for Kiwi Property, the one most affected by the extended lockdown. The sector as a whole appears more attractive due to their generally defensive nature in a low-interest rate world.
Tourism Holdings led the market higher (+7.3%) on no news, as a more favoured tourism play as compulsory masks on domestic air travel may push demand for the safer "bubble" travel within a campervan.
Chorus shares were higher reporting their result, which was largely in line with expectations due to the pandemic, however showed some promising trends.
3 Things Markets Will be Watching this Week
- COVID-19 related news-flow remains key, with second wave and lockdown headlines, while US Congress debate what an extension of stimulus will look like.
- Investors will be looking for guidance from the world’s Central Bankers as they meet (virtually) at the Jackson Hole symposium
- Locally, it is another big week of earnings ahead. Companies of note reporting include: Fortescue, Chorus, Ansell, Stockland, Meridian, Spark NZ, Ramsay Health Care, Woolworths, Air NZ, Boral, NEXTDC and Port of Tauranga.