Global markets were mixed overnight (S&P 500 index -0.3%) as Wall Street ended the session lower with investors selling tech-related growth shares as US bond yields climbed to a 14-month high.
The 10-year Treasury yield, which is having a great impact on equity markets closed at 1.72%, pulling back after reaching a 14-month high of 1.77% earlier in the session. Combined with hopes of a strong economic recovery this saw the US dollar to strengthen for a second day.
US Bank stocks rebounded as investors took heart from signs that the impact from the fallout from a large hedge fund which blew-up did not ripple out into broader markets.
A Euro area measure of economic confidence, a mix of consumer and business confidence – was also much better than expected, rising to its highest level in a year. The Euro Stoxx 50 index rose by 1.1% to a fresh record high, although the broader European ended the session higher is still just shy of the February 2000 peak. European markets have lagged recently given they are experiencing issues with new waves of COVID and are behind the vaccination rates of the US & UK.
Woodside Petroleum (WPL:ASX)
Oil and LNG producer Woodside Petroleum has been recovering strongly over the past 6 months in-line with rebound in oil prices as the world economy starts to ramp up activity once again. WPL did report a weak result for 2020 financial year despite record full year production of 100.3 million barrels of oil equivalent (boe).
However, due to a 33% reduction in the volume weighted average price of its products to US$32 per boe due to covid-19 slamming oil prices due to lack of movement and activity, WPL reported a -26% decline in operating revenue to US$3,600m. Things were even worse on bottom line profit due to previously announced non-cash impairments and onerous contract provisions. For the 2020 financial year Woodside recorded a net loss after tax of -US$4,028m.
On an underlying basis (excluding one off non-cash items), net profit after tax came in at US$447m which was down -58% year on year.
As the economy re-opens WPL shares should recover in the year ahead. We continue to remain BUY rated on WPL as our top oil and LNG play given their low production costs and healthy balance sheet, and gained confidence as the business has navigated through covid-19 relatively unscathed.
Australia & New Zealand Market Movers
The Australian market (ASX 200 index -0.9) fell again yesterday with AGL and the miners leading the market lower, while travel stocks were under pressure after Queensland reported new covid-19 cases.
Australia's technology stocks started to recover after falling hard at the start of the week – with Xero rising +2.2%, Megaport up +2.9% and Wisetech up +2% which saw the sector as a whole more or less flat for the day. AGL shares dropped -3.5% after the utility company said it would split itself into two, as Australia's largest multi product energy retailer and its electricity generation business as a separate entity.
The New Zealand market rose again on Tuesday (NZX 50 index +0.6%). Auckland International Airport led the market up +4%, followed by Spark (+3.5%) on no news as it nears end of quarter re-balancing. It has been a rough period for the NZX, with the NZ market down -5% this year but the market appears to now be entering a consolidating period after the sell off.
Air NZ announced its domestic business and corporate travel had returned to 90% of pre-covid-19 level, but failed to lift investors confidence as it descended -2.3%.
Infratil approved the on-market acquisition of $20 million of shares on behalf of certain Morrison & Co executives and Morrison & Co, the shares being subject to a lock-up for between 12 and 24 months. Mark Tume, Infratil’s Chairperson, said that “the participation by Morrison & Co executives in an Infratil share-based retention plan established by Morrison & Co is a vote of confidence in Infratil’s recent performance and demonstrates their conviction in the long term growth prospects of the Infratil portfolio”.
3 Things Markets will be Watching this Week
- The pandemic will remain in focus, as rising case numbers have caused concern among investors. Further restrictions have been imposed in recent days, with the German lockdown extended until April 18 and French restrictions extended to more regions of the country. In contrast, the UK (which has vaccinated 47% of the population) will begin easing restrictions on Monday.
- US employment data – Nonfarm payrolls is released on Friday and the market is looking for a ~650k gain in employment in March and a 0.2% fall in the unemployment rate, to 6%.
- Domestically, the final release of the ANZ Business Survey comes out on Wednesday, while Synlait and NZ King Salmon are both scheduled to report 1st half earnings.