Global markets were choppy overnight, ending lower (with the US market S&P 500 Index -0.5%) after the US Federal Reserve released its latest policy statement.
The statement included a forecast for unemployment to be 9.3% by the end of 2020, and that US GDP would decline by -6.5% for this year. The Fed also reassured investors it will continue to provide support for the economy, keeping rates near zero through at least 2022. There was no real change in Fed Chairman Powell's commitment to keep the “pedal to the metal” to support stability in markets as it continues to buy securities at its current pace. Overnight also saw a switch back into the technology sector, while financials and stocks more sensitive to economic growth pulled back to consolidate after a period of rapid moves higher.
Wesfarmers Limited (WES.ASX)
Retail conglomerate Wesfarmers (WES) shares were up +4.9% yesterday, a day after providing a surprisingly upbeat trading update for the first 5 months of the 2020 calendar year (which includes covid-19 restrictions).
Traditionally strong performer Bunnings continued to strong run lifted sales up +19.2%, and Officemax sales lifted up +27.8% for the 5-month period from the same corresponding period last year, benefitting from people forced to stay or work from home, taking up more DIY projects and setting up home offices. Wesfarmers online retail business Catch sales soared up +68.7% from the same corresponding period last year also benefiting from surge in online shopping.
Given the strong share price rally and uncertainty around a number of WES divisions, we remain HOLD rated.
Australia & New Zealand Market Movers
The Australian market basically flat on Wednesday (ASX200 +0.1%) as investor confidence grew pushing the technology and retail sectors up strongly as consumer sentiment remains supportive with higher consumer spending. Online retailer Kogan shares were put into a trading halt after announcing a A$115m equity raise to provide funding flexibility to pursue potential acquisition opportunities.
Harvey Norman shares were up (+7.3%) yesterday after announcing total sales at it Australian franchises rose +17.5% for the first 5-months of 2020, compared to the same corresponding period last year, however stricter lockdown measures overseas hit the financial performance of Harvey Norman's overseas businesses.
The New Zealand market was lower yesterday (NZX 50 Index -0.3%) as upward momentum subsided after a weak day of trade in the US, with some profit taking given the strong run recently. Infratil resumed trading and dropped -4% down to $4.97, but is still above the institutional placement price of $4.76 per share for new shares on offer. Z Energy fell after announcing fuel volumes fell 1% from the previous week (which included Queens Birthday long Weekend), but still remain down -30% from the same corresponding period last year.
Given Air NZ's recent rally there are rumours they are in talks with bankers and adviser to help the company raise equity. Air NZ responding saying they will "continue to assess its capital structure and the options available to it, including taking advice from professional advisers as required, with a $900m loan facility from the Crown which is yet to be drawn".
3 Things Markets Will be Watching this Week
- Once again, US-China trade tensions and covid-19 news-flow will remain top of mind.
- A decision by the US Federal Reserve will be made this week.
- Closer to home, Ryman Healthcare will release its full earnings on Friday while an AGM will be held by Stockland.
Have a Great Day,