Global markets were mixed overnight (S&P 500 index +0.2%) after retail-sales data missed estimates in a sign the economy may slump without a spending deal as the virus prompts fresh restrictions. On a positive note, congressional leaders appear close to a bill that would inject more than $700bn into the economy.
The US Federal Reserve held its last meeting for the year this morning, and the Fed decided to keep interest rates unchanged in its December meeting after slashing them to near-zero in an emergency meeting in March due to the fast-spreading coronavirus. The Dot plot from the FOMC remains the same and they are committed to asset purchases until substantial progress is made with regards to unemployment and inflation. However, the Fed dialled up its economic expectations slightly for the end of this year as well as for 2021, according to the central bank’s Summary of Economic Projections – it now expects real gross domestic product to fall just 2.4% in 2020, compared to a decline of 3.7% predicted in September. The Fed also upped its 2021 real GDP forecast to 4.2% from 4.0% expected previously. The Fed also now expects that the unemployment rate should fall to 5.0% in 2021, compared to the central bank’s previous estimate of 5.5%.
ANZ Bank (ANZ:ASX / ANZ:NZX)
As we touched on yesterday, the big banks all ended higher after the regulator on Tuesday relaxed dividend payout caps instituted due to the pandemic.
ANZ also held its annual general meeting yesterday. At the meeting, the bank’s CEO Shayne Elliott spoke positively about the future. He said: “We have a substantially simpler business that is less focused on dealing with problems and more focused on winning and keeping customers… I believe this sets us up to win in the coming years as we help shape a world where the people and communities we serve once again thrive”.
Interestingly, the CEO also spoke about the future and advised that he is looking at COVID-19 differently. He said: “There is another way of thinking about a crisis – it is of course just a period of rapid change. In fact, many of the great companies we think of today, companies like Microsoft, Apple, and Amazon forged their success in periods of great dislocation. This is because people in a time of crisis have new needs and good companies figure out how to provide for them… and this is where my focus and the focus of my team is. We stand ready to take advantage of the opportunities that will arise. We are supporting our best customers and will emerge with stronger relationships than we started. We will continue to reshape our portfolio to produce a more balanced, lower risk business that generates decent, more predictable returns. We are going to continue to make the bank simpler and easier to manage”. Mr Elliott pointed to its recent partnership with global payments leader Worldline as a great example of this as it provide its small business customers with access to the world’s best technology, allow them to get paid, quickly, safely and at low cost.
We currently have a HOLD rating on ANZ with Westpac being our top bank sector pick. We think the outlook for the banks continues to materially improve and are positive on the sector as a whole with improving macro factors while the banks are still being attractively priced relative to the rest of the market.
Australia & New Zealand Market Movers
The Australian market (ASX 200 index +0.7%) was higher following rebounds in Australia's largest sectors, mining and financial stocks.
Afterpay soared to a new record, up 4% to $114.60, extending its strong start to the week ahead of its inclusion in both the S&P/ASX 20 and the S&P/ASX 50 indices.
Crown will begin opening the non-gaming areas of its Barangaroo resort in Sydney from 28 Dec after being given the go ahead by the NSW Independent Liquor and Gaming Authority (ILGA) yesterday. Gaming facilities are still banned until at least February when former NSW Supreme Court judge Patricia Bergin is due to deliver her report into Crown’s suitability to hold a gaming license in NSW. Separately, a special investigator has been appointed to probe Crown’s suitability to operate Melbourne’s casino.
The New Zealand market (NZX 50 index +0.5%) was higher yesterday.
In stock news, Summerset was higher as it released strong underlying earnings guidance, implying a ~12% upgrade at the mid-point of the guidance range after adjusting for the repayment of $8.6m of government wage subsidies. Ryman is also repaying the $14.2m wage subsidy it received.
Stride Property announced a $54m acquisition for its Industre JV of 48-60 Wilkinson Rd, Ellerslie. The site is notable for its access to the Southern motorway and is the long-time home of the NZ Herald printing presses. The site is 3.5 ha and is being purchased on an initial yield of 5.3%.
Tilt Renewables announced that it will supply ASX-listed gold producer Newcrest Mining with electricity for 15 years from its under-development Rye Park wind farm in NSW.
3 Things Markets Will be Watching this Week
- COVID related news flow, including vaccines are likely to dominate headlines for another week.
- Highlights this week include interest rate decisions from the US Federal Reserve, Band of Japan and Bank of England.
- The latest employment data in Australia is due on Thursday along with housing starts. Closer to home, the latest NZ migration print is due along with Q3 GDP and business confidence.
Team
