Global markets were lower overnight as US stocks fell (US S&P 500 index -0.8%) and Treasuries gained as investors mulled whether the levels of stimulus being provided is enough amid a gradual economic recovery. Tech stocks have underperformed again, with the NASDAQ sitting near its recent low and some 10% off its all-time high, set earlier this month.
There have been some more encouraging noises around US fiscal stimulus negotiations over the past few days. Trump implored Republican senators to “go for the higher numbers”, rather than sticking to their very modest stimulus requests. Democrat leaders, who rejected a compromise $1.5tn proposal recently put forward in the Senate by a bipartisan group of lawmakers, said they were “encouraged” by Trump’s comments. The Democrats still want a $2tn+ stimulus package but, if Trump can sway Republicans to soften up their demands, then a compromise deal may still be possible
At the same time, Central Banks globally remain in support mode. Overnight Bank of England policymakers said they were exploring negative rates to counter ongoing risks to the labour market after voting unanimously to maintain their key interest rate at 0.1%, causing the pound to slide. Earlier, the Bank of Japan kept its asset-purchases and bond-yield targets in place.
Heartland Group (HGH:NZX / HGH:ASX)
The major mover of the day on the NZX yesterday was Heartland Group Holdings which rose 5.9% after reporting it expects to lift profit by as much as 18% in the current year as it grows its motor, business and reverse mortgage lending.
2020 underlying profit was NZ$70.5m (-6.1%) driven by higher-than-expected net interest income, which more than offset declines in business relationship and rural relationship receivables. The adjusted impairment expense ratio also improved.
HGH declared a final dividend of NZ2.5 cents, bringing the total dividend to NZ 7 cents. The company expects to return to a pay-out ratio aligning with historical levels once RBNZ restrictions on bank dividends are lifted.
We currently have a HOLD rating on Heartland Group and will release a full update in our weekly report.
Australia & New Zealand Market Movers
The Australian market sold off on Thursday (-1.2%) unwinding its strong start to the week's trading with local shares tumbling, driven by a fall in mining and tech stocks. Afterpay led the losses locally, while Fortescue Metals Group and Mineral Resources got hammered after Morgan Stanley downgraded its rating on the pair to "underweight", saying the miners had run ahead of expectations.
The stronger-than-expected August labour force report also did little to move sentiment, with the increase of 111,000 new jobs going largely unnoticed by the market.
The New Zealand market was lower yesterday (NZX 50 Index -0.3%) with the big news being the latest NZ economic growth (GDP) figures. NZ's GDP declined a record -12.2% in the June quarter, which compares to Australia (-7%), Canada (-11.5%), Japan (-7.9%), the UK (-20.4%) and the US (-9.1%). On an annual basis, GDP fell -2% to June. The market however largely shrugged this off as the number was actually better than forecast by economists.
In stock news, a2 Milk’s CEO was in the press highlighting the souring of Australia-China relations is regrettable and more thought needs to go into what governments and business leaders say publicly.
SkyCity have announced they will be opening a new VIP machine gaming area as part of a $35m Auckland property upgrade – to be called 'Black'. The area is twice the size of the current VIP machine gaming space. The business is designed in particular for local VIPs, particularly given the dearth of international travellers in the current environment.
3 Things Markets Will be Watching this Week
- COVID-19 related -flow remains key, with second wave and lockdown headlines, while US Congress debate what an extension of stimulus will look like.
- The key event this week is the US Federal Reserve Interest rate decision, which will be followed by Fed Chair Powell’s news conference.
- Locally, NZ’s Q2 GDP data and Australia’s latest employment data are both due on Thursday.