Global markets were hit hard overnight, with US markets falling (S&P 500 -3%) as plummeting oil prices continue hit market sentiment, with growing fears of a deep economic downturn. Several companies fell on weak quarterly results, as well as providing bleak guidance for the second quarter given huge covid-19 related uncertainty.
After the close, streaming giant Netflix announced it added 15m new subscribers for the first quarter, beating expectations with the boom in numbers starting in mid-March – as one of the very few businesses to benefit from the global covid-19 pandemic.
The current level of volatility in the market is what we had expected and we think the near term will remain volatile. The market seems overly optimistic, making a pull-back likely in the near-term given the fast recovery in share markets (since March) which seems to be at odds with the outlook for the real economy.
EBOS Group Limited (EBO:NZX / EBO:ASX)
EBOS Group (EBO) shares were up yesterday, after announcing strong trading conditions as a benefactor of Covid-19 epidemic for its third quarter ending 31 March 2020. EBO businesses were deemed as essential services and critical in ensuring continued and stable supply of healthcare, medical and pharmaceutical products to the community.
EBOS have also managed to strengthen their balance sheet, allowing for an additional A$50m in bank debt facilities.
EBOS maintained guidance for the 2020 financial year to be up significantly from the previous year due to the commencement of the Chemist warehouse deal, and that the level of uncertainty from their consumer facing businesses gives them no reason to believe that the previous guidance would not be met.
We maintain a BUY rating on EBOS and had included it in our Covid-19 top 10 as a solid healthcare exposure.
Australia & New Zealand Market Movers
The Australian market fell (ASX 200) fell -2.5% for the second day in a row on Tuesday, pulling back from its strong recovery since March. Investors remain cautious over the economic backdrop after data showed 700,000 Australian lost their jobs in the first week of April, with potential implications for corporate earnings.
Qantas started the day strong reacting to the Virgin Australian administration news but closed flat, while gold miners were the select few to end the day up.
The NZ market (NZX 50 -2.1%) fell yesterday, mainly absorbing negative sentiment from around the globe due to slumping oil prices, despite the majority of shares not being directly impacted.
Given the strong run recently by the companies most affected by covid-19 there was profit taking with the likes of Tourism Holdings, Vista Group and Sky City selling off heavily.
Restaurant brands were down, despite reporting +5.3% revenue growth for the first quarter which included 6 days of no trade in New Zealand (due the lockdown). However, the second quarter is seeing a significant impact due to the full impact of the lock down and restrictive trade (no dine in).
3 Things Markets Will be Watching this Week
- Coronavirus related news-flow remains key in terms of market moves.
- US corporate earnings will be in focus with some big names reporting in the US, including Amazon and Netflix.
- Capital raising announcements by companies are growing as companies ask for cash from investors in this uncertain period.
Have a Great Day,