Global markets were mostly higher overnight, (S&P 500 index +1.5%) with US markets rebounding from Monday’s sell-off as investors ‘bought the dip’.
After a strong start the rebound gained steam with US 10-year treasury yield creeping back up to 1.22% with cyclical/values stocks leading the way with industrials & financials the best performing. Banks stocks improved on the back of higher bond yields and a more optimistic view on the economy. In saying that, almost all sectors were up, with the stocks hardest hit making the biggest gains such as Airlines and cruise companies being most sensitive to sentiment surrounding the virus.
European stocks were up overnight (Stoxx 600 index, +0.5%) and unlike the US market only partially recovered from its Monday’s sell off as basic resources led the gains, while travel and utilities sectors were both down.
BHP Billiton (BHP:ASX)
Mining Giant BHP shares fell -2.5% yesterday despite announcing record production output for Iron Ore and Copper for the year – as the market was let down by guidance of almost flat production guidance for the following year.
It is also rumoured BHP is considering leaving the multi-billion-dollar oil and gas industry as it looks to exit fossil fuels. It is understood BHP is reviewing its business and would consider options including a trade sell. Somewhat worryingly, the company also said it expects China’s ban on Australian coal could last for a number of years.
Elevated Iron Ore Prices driven by strong demand in China outstripping supply has seen BHP shares reach new high’s recently and we remain comfortable with our BUY rating and anticipate strong dividends to be paid over the near and medium-term. BHP report their annual result soon and the stock remains our preferred sector pick given its diversified production base and low cost production with superior scale.
Australia & New Zealand Market Movers
The Australian market was down yesterday (ASX 200 index, down -0.5%) extending the global sell-off from the overnight session.
Major miners led the market lower, followed by utilities and energy. Bank stocks were mostly weaker, with ANZ bucking the trend up +0.6% after reacting to its $1.5 billion share buy back announcement on Monday after hours.
Healthcare stocks were the best performer on the day, market heavy weight CSL up +1.3% as investors looked for stock’s immune to lockdown and weak economic activity.
Crown Resorts fell -2.7% as it was found the operator was found unsuitable to hold a Victorian gaming license. This was due to a culmination of months of caustic evidence against the company including money laundering, credit card fraud, tax evasion and endangering the well-being of problem gamblers.
The New Zealand market was down a touch on Tuesday (NZX 50 index -0.1%), recovering from a heavy loss early in the session.
New Zealand’s largest listed company Fisher and Paykel healthcare (a direct beneficiary of covid) jumped +2.3, offsetting broader losses as investors were concerned about surging covid cases around the globe.
Ebos was also up +1.90% and Contact energy rose +1.5% as investors favoured stability amongst the pandemic.
SkyCity fell -3.6% after revealing its Adelaide casino would be closed for another week due to lockdown, with other Aussie exposures like Fletcher building down -1.7%.
3 Things Markets will be Watching this Week
- Key events this week include US earnings (Netflix, Johnson & Johnson, Coca-Cola), ECB July rate decision, Eurozone Manufacturing PMI.
- Covid-19 related development globally, and particularly in Australia (NSW and Victoria Lock down).
- RBA Minutes and quarterly updates from Australian miners.