Fed Refuels Rebound | Z Energy

19 June 2020

Global markets were mixed overnight (US S&P 500 Index +0.8%), with the US rebounding after opening lower as markets remain jittery over concerns over a potential second wave of coronavirus cases. However, these losses were reversed in afternoon trading, following an announcement by the US Federal Reserve regarding its corporate bond purchasing program that boosted investor confidence. A new flood of liquidity in the form of fiscal and economic stimulus saw financials and the technology sector benefit the most, with all sectors trading higher.

Closer to home, In light of fear's of a second wave, NZ prime minister Jacinda Arden announced September is the most likely time to open up a trans-tasman bubble, as Australia added a further 18 covid-19 cases yesterday. The decision comes despite lobbying for an earlier start to support travel and tourism sector, with the possibility of the Pacific Island to also open in September as well. Australian PM Scott Morrison has given a strong indication the JobKeeper and JobSeeker packages will have to start winding up around their legislated expiry at the end of September. 

Z Energy (ZEL:NZX / ZEL:ASX)

Z Energy  shares (ZEL) continue to remain beaten down due to the impacts of covid-19, and have been providing weekly volume updates. As restrictions eased from lockdown fuel volumes have recovered some what, however total fuel volumes sales are still down -30% from pre lockdown volumes, largely partly due to lack of jet fuel sales as international flights are virtually non-existent with some demand from domestic flights.

However, excluding Jet fuel, fuel volumes are still down -20% from last year with the most recent update based on level 2, as people were still encouraged to stay at home.

We remain HOLD rated on ZEL despite its 'cheap' valuation we are hesitant due to our negative view on the fossil fuel industry.


Australia & New Zealand Market Movers

The Australian market (ASX 200 Index -2.2%) was in the red for a third straight day on Monday with investors concerned about the prospects for China's economy recovery hitting another speed bump as COVID-19 cases ticked higher in Beijing, with growing fears of a second wave in other countries (particularly the US). The miners were heavily hit, given their strong exposure to China's economy, with energy stocks being the worst performer on the day.

Banks were also lower, amidst concerns one in five home loan borrowers who asked for repayment holiday's during covid-19 crisis could be in deep financial strife, which could amount to 96,000 borrowers with mortgages of almost $35 billion.

The New Zealand market fell again yesterday  (NZX 50 Index -0.4%) as covid-19 cases start to re-emerge in China, previously thought to have the virus under control. Travel and tourism stocks were heavily hit, particularly SkyCity which led the market lower down -4% with the fall also added to by the trans-tasman bubble not opening as early as the market might have optimistically anticipated.
After a solid rebound in house prices in April (largely driven by low sales volumes and lack of supply), for the month of May sales volumes picked up significantly from April as restrictions eased however are were down -46.6% from last year. National median house prices were down -8.8% from the same corresponding period last year, with a more modest decline in Auckland (1.6%).


3 Things Markets Will be Watching this Week

  1. ​​​Covid-19 related newsflow, namely the re-opening of economies around the globe and new case growth in Southern US States. 
  2. Economic data including retail sales and a raft of housing data in the US along with a data dump in China.
  3. Locally, employment data in Australia and Q1 GDP in NZ will be closely watched. 

Have a Great Day,


A new flood of liquidity in the form of fiscal and economic stimulus saw financials and the technology sector benefit the most, with all sectors trading higher.

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