Global markets largely were up overnight, as the US market (S&P500) climbed +6%, with all sectors up except energy as oil prices (WTI crude) slipped another -3%.
The Trump administration increased their spending to send cheques to Americans within the next two weeks to curb the financial effect of covid-19. European markets were also up on heavy stimulus packages support announced both in the US and in Europe.
The number of covid-19 cases continue to grow, now at 184,000 with 7,500 confirmed deaths, so the heightened containment efforts are crucial. While near-term economic situation appears bleak, these actions are required to prevent things escalating out of hand, and government stimulus packages are in place to cushion the blow to prevent an all out crash.
While it is early days, it feels like markets may be finding a bottom. Valuation support is likely to see investors return to markets, and the market will turn higher well before the economy, as it is forward looking. The worst thing investors can do is panic sell now, given the large amount of negativity already being factored into share prices at current levels
Stock in Focus: Fisher and Paykel Healthcare (FPH:NZX / FPH:ASX)
Fisher and Paykel Healthcare shares throughout most of the covid-19 turmoil have bucked the trend and its shares remain resilient, still trading very close to all-time highs.
FPH announced yesterday that they expect their net profit after tax for the 2020 financial year to be between $275m and $280m, an upgrade of $10m-15m from the previous guidance. The upgrade has been driven by a weakening NZ dollar and their respiratory humidifiers and consumables being directly involved in treating patients with coronavirus. This has seen an increase in demand globally for FPH's products and they have ramped up manufacturing output accordingly.
We currently have a BUY rating on FPH
Members should look out for a full update on FPH to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian market rebounded on Tuesday (ASX 200 index +5.8%) recovering roughly half the losses endured on Monday, marking one of the biggest single-day rallies – illustrating the large amount of volatility in the market currently.
Almost all sectors were in the green with Financials and resources performing the best (contrasting to being the worst performers on most down days) as investors snapped up blue chip companies that have been heavily sold. While travel and casino related stocks continue to slip further with Crown extending its social distancing initiatives at their Perth location. Some companies with strong correlation to Australia's economic growth were hit heavily as rising concerns of a recession and uncertainty on when a recovery could occur.
The NZ market slipped slightly yesterday (NZX50 -0.4%) as the market recovered from a larger dip in early trade following the New Zealand government announcing a $12.1 billion stimulus package to cushion the effects caused by covid-19. The package includes assistance for public healthcare, affected businesses, workers, and beneficiaries.
Air NZ remains in a trading halt, as the $600m aviation support package excludes the national carrier, and the government is still in discussion over details. Auckland International Airport slipped down to five-year lows after announcing it will be cancelling its next dividend and reviewing their capital expenditure outlook, and they also removed their previous guidance given the heavy travel restrictions and airlines reducing capacity. Spark shares continue to edged higher, and Mainfreight rose +2.3% as trading so far this year was ahead of the same corresponding period last year given global freight trade lanes were open.
3 Things Markets Will be Watching this Week
- Coronavirus related news-flow remains key in terms of driving investor sentiment.
- Moves from central banks globally in response to coronavirus,
- Data from the US including building permits, housing starts and existing home sales. Closer to home, Australia’s latest employment data is due to be released on Thursday along with the latest net migration data in NZ.
Have a Great Day,