Investors Buy the Dip | Woodside Result

23 September 2020

Global markets were up overnight (S&P 500 Index +1.1%) snapping a 4-day losing streak as investors "bought the dip" despite a likely delay in new fiscal stimulus by Congress and as an increase in the number of covid-19 cases dampened hopes of a faster economic recovery.

Most sectors were up, led by consumer discretionary and real estate, while the tech sector also enjoyed healthy gains, with Amazon up +5% after receiving an upgrade by analysts. 

British Prime Minister Boris Johnson announced new restrictions are likely to last six months and told people to work from home if possible, saying the country is at a “perilous turning point” for the virus – putting more pressure on the UK economy and further delaying a recovery. 

Fed Chair Jerome Powell on Tuesday told a congressional panel that the economy had shown “marked improvement” since the pandemic drove it into recession, but the path ahead remains uncertain and the US Central Bank will do more if needed. 

Woodside Petroleum (WPL:ASX)

Woodside Petroleum (WPL) shares have been trading weaker as the price of oil slips as demand struggles to recover to pre-covid levels. WPL released a weak first result for the first half of 2020, which saw operating revenue slump more than half down to US$2.26 billion, despite higher production which was offset by a slump in oil prices.  Reported net loss after tax was -US$4 billion, due to a US$5.3 billion impairment charge – ignoring the non-cash item underlying net profit after tax was US$303m still positive. Despite the challenging environment WPL continues to maintain a healthy balance sheet with $7.5 billion in liquidity (cash) available breakeven cost below current market price of oil avoiding future losses or cash burn should oil prices remain firm.  

Due to WPL strong balance and low breakeven cost we remain BUY rated as an oil recovery play.

Australia & New Zealand Market Movers

The Australian market slipped again on Tuesday (ASX 200 Index -0.7%) marking four straight days of losses with the market back down to mid-June levels, due concerns around a second wave in Europe emerging and a slower economic recovery for both the US and Europe. 
Mining and banking stocks were the biggest drags on the market, both being most sensitive to economic outlook and banks hit by fears of negative interest rates.

Travel stocks joined in a global pandemic-related rout for the sector, with travel company Flight Centre retreating -4.1%, Corporate Travel down -5.8%, and Qantas slipping -1.8%. 

The New Zealand market was up yesterday (NZX 50 Index +0.6%) bucking the trend of losses globally, helped by a weak Kiwi helping the major exporters.

Fisher & Paykel Healthcare jumped +4 percent as rising virus cases may extend the increased demand, while Pushpay edged higher wiht both companies also benefitting from a weaker NZ dollar. Sky City was up +3.2%, as physical distancing restrictions were lifted outside of Auckland allowing full operation for its Queenstown and Hamilton casinos.

NZ gentailers also did well as the low interest rate environment, made their reliable dividend more attractive especially given uncertainty regarding the global economy. 


3 Things Markets Will be Watching this Week

  1. ​​​​​​​​​​​​​​​COVID-19 related -flow remains key, with second wave and lockdown headlines, while US Congress debate what an extension of stimulus will look like.
  2. Locally, the RBNZ OCR meeting is the key event on Wednesday.
  3. There will also be earnings from Nufarm, Kathmandu, Premier Investments and Hallenstein Glasson. AGM’s are scheduled for Turners Automotive, Mercury, Oceania Healthcare and Vector.
Global markets were up overnight (S&P 500 Index +1.1%) snapping a 4-day losing streak as investors "bought the dip" despite a likely delay in new fiscal stimulus by Congress and as an increase in the number of covid-19 cases dampened hopes of a faster eco

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