Global markets were volatile overnight, with US Markets (S&P 500 Index-0.2%) ending the session down, but clawing back a much larger loss earlier in the session as investors monitor developments in Ukraine.
Ukrainian forces have held key cities including the capital of Kyiv. Officials from both countries held a round of negotiations near the Belarus border on Monday but there seems little hope for a peaceful resolution given the divergent demands between the two countries. Over the weekend, the US joined allies in Europe and Canada in moving to bar key Russian banks from the interbank messaging system, SWIFT. Additionally, the US and European allies have also taken action against Russia’s central bank, effectively freezing the country’s foreign reserves.
US bank and Real estate stocks led losses, while Energy and Industrials outperformed as defence and cyber security stocks benefit from the ongoing attacks. The risk off attitude from investors saw them flock to treasury bonds, which slipped 15 basis points to 1.83%, but interestingly it caused tech stocks to rise, benefiting from lower interest rates.
European Markets were down overnight (Stoxx 600 index -0.2%), with banks stocks leading losses being most affected.
Closer to home, the NZ government announce it would ditch self-isolation requirement for vaccinated travellers from Australia or who are NZ citizens from anywhere else in the world by the end of this week. The news comes as a big relief for the tourism industry in terms of cross border movements and promoting trans-Tasman tourism. Our stock pick in the NZ tourism sector has been Tourism Holdings (THL).
Tourism Holdings (THL:NZX)
Tourism Holdings rose +6.1% yesterday, as investors appear more upbeat on its recovery following its half year result on Friday and a move to relaxed isolation rules for certain travellers.
THL's half year earnings didn’t contain too many surprises other than vehicle sales margins remaining strong. Opening isolation free travel to Australians would help promote more tourism travel and quicken the recovery. While there was no news yet about any progress for the Apollo transaction, as it is conditional on regulatory approval both here in New Zealand and Australia.
We are BUY (High-Risk) rated on THL, in being in the best position to benefit from reopening in international travel, especially if the Apollo transaction goes through.
Australia & New Zealand Market Movers
The Australian market was higher yesterday (ASX200 index +0.7%) as it recovers from the recent self-off.
Most sectors traded higher lead by materials and energy which both benefit from higher commodity prices as sanctions against Russia start to mount.
Invocare rose +4.5%, after its full year result came in better than expected, driven by recovery in key value drivers. GrainCorp rose +5%, as it is also set to benefit from Russian Sanctions.
Heavy rain in parts of Australia causing flooding, saw agriculture stocks rise, however Suncorp fell -3.2% after flagging it estimates $75m in costs from insurance claims.
The New Zealand market was up on Monday (NZX 50 index +0.3%) responding to a positive rebound in global markets over the weekend, as well as travel restrictions relaxing at the border.
Scales rose +5%, and Ryman Healthcare lifted +4.9%, as both had struggled with labour shortages.
Genesis Energy shares slipped 0.9%, after delivering a softer half year result, but what was encouraging is a more upbeat full year guidance and adoption of dividend reinvestment plan to invest in more renewable energy sources.
3 Things Markets will be Watching this Week
- Geopolitical Risks – Russia/Ukraine.
- Eurozone inflation figures and the latest manufacturing data in China.
- Locally, the RBA meeting will be a big focus along with Q4 GDP data in Australia.
