Global markets were higher overnight (S&P 500 +1.4%) as signs of an economic recovery from mandated shutdowns helped investors look beyond US social unrest and pandemic worries. S&P 500 has rebounded strongly from March lows and is now -7.8% away from record high's while the tech heavy Nasdaq index is just 1.4% away from reaching new record highs. Financials, industrials and technology pushed the stock indexes well into the black overnight, with all sectors up except healthcare.
There appears to be growing confidence the US economy can safely re-open, much like other economies such as China and Italy have successfully done. The recent spate of grim economic data has been shaken off as not as a bad as some economists fears, as stimulus packages may be enough to offset grim, but not worst case scenarios. We now await the US Labor Department’s more comprehensive May jobs report (due US Friday morning), which is expected to show unemployment soaring to a historic 19.7%, which could have large implications on the market if it comes above expectations.
Closer to home, the Australian government is set to announce a $688m HomeBuilder stimulus package to benefit prospective new home builders and substantial renovations, with the program restricted to middle incomes and new homes valued under $750,000. There was also positive news around the Trans-Tasman bubble – Australians will be able to register their interest for flights to NZ in July with a Canberra-Wellington route to be used as a guinea pig to test whether the trans-Tasman bubble is safe.
Costa Group (CGC:ASX)
Agriculture producer Costa Group (CGC) shares were lower after their AGM update, revealing their long-serving CEO intends to retire within the next nine months. While trading conditions were favorable for Costa, the update appeared more conservative than its April 'coronavirus' update. Costa managed to achieve favourable pricing over the lockdown period thanks to strong demand , however this was offset by increasing operating costs relating to the pandemic.
Overall trading conditions and operations for 2020 so far are still ahead of extremely challenging 2019 Costa had experienced, despite early headwinds experienced earlier in the year. expectations are that 2020 should be ahead of 2019, and Costa are currently on track and on budget to achieve that – assuming no significant event occurs.
We remain BUY rated on CGC
Australia & New Zealand Market Movers
The Australian market (ASX 200 Index +1.8%) rose strongly yesterday, reaching a new three-month high with investors optimistic amid signs the economy is recovering from recession. The market was buoyed by financials and major miners early, as well as other large blue chips (more sensitive to economic activity) as investors shrugged off Australia's first quarter GDP contraction, its first since the March quarter of 2011, but coming out slightly better than feared.
The New Zealand market (NZX 50 Index +0.8%) was up on Wednesday as investors grow increasingly optimistic about the recovery from the covid-19 outbreak with a return to normal under level 1 possibly starting next week, with no social distancing restrictions in cafes bars restaurants public venues and domestic flights with the only restriction being international travel. This saw strong gains across the travel and tourism sector again, further boosted by test flight in July between Wellington and Canberra to test the safety of extending a trans-tasman bubble.
A stronger NZD, which jumped to 64 US cents put some pressure on Fisher and Paykel healthcare and Pushpay.
3 Things Markets Will be Watching this Week
- Tensions between the US and China are becoming more animated as election polling in the US is tightening.
- Covid-19 and lockdown related newsflow remains key.
- US nonfarm payrolls along with ECB and RBA interest rate decision.
Have a Great Day,