Global markets were mixed overnight as technology stocks outperformed (S&P 500 index -0.2%).
A rally in cyclical stocks that has propelled global benchmarks to record highs in recent weeks lost momentum on Monday, but the Nasdaq hit another high as big tech stole the show.
Markets are increasingly expecting a stimulus deal to be done after last week’s disappointing jobless data. Lawmakers are planning to unveil more details of their proposal on a $908bn relief package, aiming to settle on language that can satisfy enough Republicans and Democrats to secure passage of one final tranche of Covid-19 aid before Congress breaks for the year. We remain sceptical.
At the same time, Brexit is back in the headlines, with talks right down to the wire and markets starting to fret that a no-deal outcome might be a real possibility. Europe slipped and the UK edged higher.
Infratil (IFT:NZX / IFT:ASX)
Infratil (IFT) has announced that it intends to undertake a strategic review of its 65.5% Tilt Renewables (TLT) shareholding, a sensible move, in our view. IFT is taking advantage of the reduced cost of capital that some asset owners ascribe to reliable infrastructure assets in general and in particular renewable energy assets with a backdrop of low interest rates implying valuations will be high. The sale also relives any balance sheet concerns. The sale could potentially add a net 25 cents per share to Infratil’s asset value, in our view,
Strategically, the growing possibility of the Australian states pushing another renewables growth drive means global investor participation is likely to rise, which makes TLT attractive to entrants and itself at risk of being crowded-out by those same entrants later during the “gold rush” for new build mandates.
Australia & New Zealand Market Movers
The Australian market was in the green on Monday (ASX 200 index +0.6%. Iron ore miners led the way as the commodity price hovered near multi-year highs, prompting a broker to hike its target prices on Fortescue (+3.8%) which hit a record high, Rio Tinto (+2.5%) and BHP (+2.1%). Travel related stocks also took flight on confirmation that Western Australia will open its border to more states.
Metcash was a standout, jumping 10% as sales momentum continued into the first five weeks of the second half as the supermarket operator and hardware retailer unveiled a profit rebound and higher dividend in the first half. Santos shares rose 3% after it signed a 10-year agreement to sell liquefied natural gas to a unit of Japan's Mitsubishi from its Barossa project, 300 kilometres north of Darwin.
Interestingly, a professor who is leading University of Queensland’s vaccine project in collaboration with CSL, said that despite recent vaccine candidate approvals, ongoing investment in other COVID-19 vaccines was still necessary. He said: “It is a more traditional vaccine," he said of the candidate being developed by UQ and CSL. "I think it will be a far more robust vaccine… and a better option for the long term, so I still think it's an important vaccine even though we're a little bit behind the mRNA vaccines".
The New Zealand market started the week in positive territory on Monday (NZX 50 index +0.2%).
Infratil gained after saying it will review its 65.5% shareholding in Tilt Renewables (+16.1%), having received several expressions of interest in the wind farm operator and developer. Mercury Energy also stands to benefit from a potential takeover as a ~20% shareholder in Tilt.
3 Things Markets Will be Watching this Week
- COVID related news flow, including vaccines are likely to dominate headlines for another week.
- US inflation data is released on Thursday.
- US fiscal stimulus package talk also continue to drag on.