Global markets went into free-fall overnight with the US market down -9.5%, the worst one day performance since Wall Street’s “Black Monday” crash of 1987.
President Trump’s announcement that the US government is restricting travel from Europe for the next 30 days sent global markets into a panic, with a $500bn 3-month repo operation from the US Federal Reserve failing to lift the market (a similar announcement to the quantitative easing it used during the Global Financial Crisis to stabilise debt markets). The European Central Bank left interest rates on deposit facilities unchanged at -0.5% and also announced expansionary measures including new asset purchases.
Corona-virus deaths in Italy have jumped through 1,000, while confirmed cases pushed through 15,000, with markets now realising the full economic impact potential.
With a broad-based market sell-off, stocks which are relatively immune to corona-virus are starting to look attractive – particularly quality large cap healthcare stocks such as Fisher & Paykel, CSL, and EBOS. However, it still feels far too early to be buying Tourism, Transport, Leisure and Hospitality. Tourism Holdings was the latest company in the sector to withdraw formal earnings guidance, while Auckland Airport released a profit warning.
Stock in Focus: Auckland Airport (AIA:NZX / AIA:ASX)
Auckland Airport went into a trading halt yesterday afternoon and this morning has revised its 2020 profit guidance from $260m-270m to $210-235m after disclosing international passengers have fallen approximately 18% in the first 10 days of March (a similar reduction to Sydney airport).
The quantum of the downgrade paints the picture – and while "value" maybe emerging, the risks around the sector are too great to buy in the near term.
We currently have a HOLD rating on AIA.
Members should look out for a full update on AIA to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian market plummeted on Thursday as the ASX 200 index fell nearly 8% at its low point — the worst one-day fall since the collapse of US investment bank Lehman Brothers triggered losses in October 2008. Consumer stocks, oil stocks, banks and miners led the falls. Flight Centre plummeted 18%, Webjet fell 19%, Corporate Travel Management tumbled 9%, Qantas declined 9% and Virgin Australia dropped 16%. Even gold miners were unable to escape the market wreck, with the price of the precious metal dipping as investors grappled with safe haven demand, central bank monetary easing and government fiscal stimulus efforts.
The NZ market tumbled yesterday (NZX 50 -5%) following global turmoil. Travel stocks and Vista Group led the market lower, with containment measures likely to impact on cinema visitor numbers. A2 Milk fell (but has been outperforming the broader market) even as the milk marketer announced today it was expanding into Canada through an exclusive licensing agreement with Agrifoods Cooperative.
3 Things Markets Will be Watching this Week
- Coronavirus related news-flow remains key in terms of driving investor sentiment.
- The European Central Bank holds a meeting on Thursday.
- Closer to home Aussie business and consumer confidence will be of interest while in NZ we have REINZ house sales on Tuesday.
Have a Great Day,