Global markets slipped overnight (S&P 500 Index -0.2%) as US stocks swung between gains and losses as investors assessed the latest headlines on the state of stimulus deal talks. House Speaker Nancy Pelosi said she hoped fresh stimulus spending would be retroactive, although the Republican Senate majority leader warned the White House against a bigger Democrat-led deal before the election. The administration said it hopes to get a deal in the next 48 hours and that its offer is now up to $1.88 trillion, below the $2.2 trillion Pelosi has pushed for.
Earnings season continues, with social media firms are trading higher after Snap reported strong earnings. Netflix slipped -6.5% after subscribers fell short of predictions.
Elsewhere, the pound jumped after European Union chief Brexit negotiator Michel Barnier said a deal is within reach. Stock markets in the UK and Europe ended well in the red as investors battled concerns of second wave COVID-19 cases in Europe.
Infratil (IFT:NZX / IFT:ASX)
Infratil held its Investor day yesterday which focused on 48%-held Canberra Data Centres (CDC) and Vodafone.
Unfortunately, the presentation didn’t reveal key valuation parameters such as CDC’s current net debt or Vodafone earnings/cashflow outlook. While CDC is executing to plan, Vodafone’s transformation process towards a “lean modern telco” is still its key focus, but perhaps now longer-dated partly due to COVID19. Potential for future separation of Vodafone telco infrastructure from retail was flagged again, noting moves in this direction in Europe.
We have had a BUY rating on IFT as we believe there are strong tailwinds and growth potential for many of IFT’s businesses. Despite Infratil’s share price now trading at relatively high valuations, we still see medium term upside potential from their growth businesses, especially with the additional funds to accelerate growth and or add value from an attractive acquisition. IFT remains our favoured infrastructure pick.
Australia & New Zealand Market Movers
The Australian market just manged to stay in positive territory on Wednesday (ASX 200 Index +0.3%) as the bank stock gains offset falls in the technology sector. The retail sector was in the spotlight after the latest trade figures showed a -1.5% decline in spending in September from August as containment measures in Victoria weighed on activity.
Lynas shares maintained a stellar run after the rare earths producer said its quarterly sales surged 129%. The stock closed 4%, taking the gains over the last month to near 20%.
Flight Centre has said it will cut 160 jobs and close 23 stores in NZ on top of heavy cuts earlier this year. Flight Centre had 1200 staff and more than 130 stores at the start of the year. It announced 58 store closures in April. Store closures cut outlets in Australia from about 900 to 520, and globally from 1500 to 800.
The New Zealand market dipped yesterday (NZX 50 Index -0.2%) as the electricity sector continued to weigh on the NZX 50 as stocks in the sector retreated from a rally in recent weeks.
In stock news, Goodman Property Trust declined even after signalling its interim financial result will include a revaluation of around $140 million, adding roughly 4% to its net tangible asset value. Vista Group International posted the day’s biggest gain, after saying it was meeting its $3 million to $4 million monthly cash burn target and cost savings from recent restructure would continue in 2021. Genesis released quarterly operating statistics which again show a strong retail performance with volume growth in electricity and gas, and big increases in netback due to price increases, reduced cost to serve.
3 Things Markets Will be Watching this Week
- The week ahead is dominated by corporate earnings in the US with key names reporting including Netflix, Tesla, Procter & Gamble, and Coca-Cola.
- In the US we will also see the release of 3rd quarter GDP figures and the last US presidential debate.
- Locally, CSL will host an investor briefing while Mirvac and AMP will provide quarterly updates and a number of companies are hosting AGM’s including Origin Energy, Crown, Magellan Financial, Webjet, and Qantas.