Global markets continued to rally higher overnight (S&P 500 Index +0.8%) as traders shifted through conflicting comments on additional stimulus measures.
Comments from President Donald Trump and House Speaker Nancy Pelosi whipsawed equity markets through Thursday morning. Pelosi said there won’t be a standalone bill on airlines without a guarantee the other stimulus items are going to be addressed.
As touched on yesterday, it seems the bulls are now back in control of a market that is increasingly betting that a Joe Biden presidential victory and gains by Democrats in Congress will be good for equities. IBM shares surged after saying it will spin off its infrastructure unit.
Locally, the RBNZ continues to reiterate that it is better to do too much than too little, thus locking in negative interest rates for next year – underpinning positive share market investor sentiment which saw the NZX hit a new all-time high.
Summerset (SUM:NZX / SNZ:ASX)
Summerset shares have jumped on a very strong trading update, and we were pleased as we recently upgraded Summerset back to a BUY as our top pick to gain exposure to the retirement sector, as it provides much better value to peer Ryman.
Summerset’s 3rd quarter sales performance was robust with continued resales momentum and the ongoing strength of the housing market helping support higher near-term house price inflation assumptions. Performance was solid across the board with both resales (125) and new sales (100) providing a solid base heading into the 4th quarter.
SUM also announced a 2.8ha land acquisition at Half Moon Bay, Auckland, with the acquisition consistent with its strategy and sees SUM continue to diversify its large land bank with a strong pipeline for future development.
Australia & New Zealand Market Movers
The Australian market added to gains on Thursday (+1.1%) for a fourth straight session. CSL leapt +2.4% as its Seqirus vaccine division secured a contract signed with the federal government to produce Australia's leading vaccine option to supply 51m doses of a COVID-19 vaccine if clinical trials are successful.
Ampol (formerly Caltex) warned it may shut one of the last remaining refineries in Australia as the pandemic drive a sustained collapse in fuel demand. Ampol note its plant's losses have spiralled to $141m this year and it has launched a formal review of the Lytton refinery in Brisbane which employs approximately 500 staff.
The New Zealand market surged yesterday (+1.8%) into record territory, supported by strong gains in F&P Healthcare (+3.4%). Vista Group and Skycity surged +9.7% and +4.7% higher the day after Auckland returned to alert level one. Vista also as it rallied from recent losses following announcements of cinema closures in key markets.
The Warehouse Group released a respectable preliminary 2020 financial year result with group sales of NZ$3.2bn up +3.3% year on year. No final dividend was announced (akin to the March cancellation) but the company noted it expects to pay normal dividends in 2021. The Warehouse is looking to make significant investment in its digital and online transformation – to the tune of ~$100m over the next 2.5 years as it seeks to consolidate its fragmented technology solutions.
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.
- US election developments will be followed closely by markets as we move closer to elections both in the US and NZ.
- On the central bank front, in Australia the RBA makes a cash rate decision and the US Federal Reserve released minutes from its last meeting.