Global markets were mostly positive overnight as US stocks pushed higher, closing at record (S&P 500 index +0.65%) highs. Investors are looking at the likely economic recovery from the coronavirus and await cues from the Federal Reserve this week amid caution over rising borrowing costs. It was the Dow’s (DJIA + 0.53%) sixth straight record high close, in a recent surge fuelled by mass vaccinations and Congressional approval of a $1.9 trillion aid bill. Expectations of a recovery accelerated demand for stocks expected to outperform as the economy reopens, such as banks, energy, materials companies.
Nine of the 11 major S&P sector indexes rose, led by utilities and real estate, each up more than 1%. In a concrete sign that the worst of the damage from the coronavirus pandemic may be over for the airline industry, Delta Air Lines, Southwest Airlines and JetBlue Airways said leisure bookings were rising.
Elsewhere, the Stoxx Europe 600 index declined 0.1% as Germany, Italy and France suspended use of AstraZeneca's Covid-19 vaccine amid a growing health scare that’s creating yet another delay for the EU's inoculation campaign.
Infrastructure investment company Infratil (IFT) shares jumped +3.6% yesterday, after announcing they would sell their 65% stake in Tilt Renewables for $1.93 billion – that’s double the value of the asset prior to the strategic review (September 2020).
The funds from the share will most likely be reinvested elsewhere – including into current businesses as well as other acquisitions. There is also the potential for a return of capital to shareholders. The sale highlights the value of IFT's premium asset base, and we continue to like their stable of top-quality infrastructure assets – especially their renewable energy and data centre assets given long-term, tailwinds. IFT management also have an exceptional long-term track record of investing and divesting and managing a portfolio of infrastructure assets very well.
We continue to remain BUY rated on Infratil on the growth prospects of their new investments and there is potential for further upside and a significant return of capital to investors.
Australia & New Zealand Market Movers
The Australian market edged higher yesterday (ASX 200 Index +0.1%), with a weak lead from the US tech heavy Nasdaq. Australian Technology stocks continued to get hit being most sensitive to rising bond yields, which were offset by major banks continuing their impressive run.
Citi was the latest bank to upgrade Australia's economic forecast for 2021, lifting its GDP forecast to +4.4%, an increase of 0.7%, and 0.3% higher than consensus.
Healthcare was the best performing sector, with CSL up +1%, while Ramsay Healthcare climbed +3.2%, and the major miners pulled back slightly.
The New Zealand market was up strongly on Monday (NZX 50 index +1.3%) on the Tilt Renewables sale, which had support from majority shareholder Infratil.
Travel stocks were also performing well buoyed by US fiscal stimulus package encouraging investors to look out for bargains and increase their risk appetite Tourism Holdings led the market higher, climbing 4.4%, followed by Vista Group International which rose 4.3%.
3 Things Markets will be Watching this Week
- Highlight this week include the latest US Federal Reserve rate decision and Fed Chair Jerome Powell’s news conference along with rate calls from the Bank of England and Bank of Japan. The announcements will be watched closely given the recent move in interest rate markets.
- In Australia, the latest minutes from the recent RBA meeting are due along with employment and retail sales data.
- In NZ, 4th quarter economic growth (GDP) data is scheduled for release later in the week while Briscoe Group, Fonterra and The Warehouse Group will all report earnings.