Global markets surged overnight (S&P 500 Index +2.3%) after Pfizer revealed its COVID-19 vaccine has been 90% effective against the dominant virus strains circulating currently. The rally in Europe and the US has been led by companies hit hardest by the pandemic, while stay-at-home winners retreated. At the time of writing the S&P 500 was led by the Energy (+15%) and Financials (+9%).
The top infectious disease expert in the US Anthony Fauci said the vaccine being developed by Pfizer will have a “major impact” on everything we do with regards to Covid-19 going forward – indicating that the news-flow is to be treated seriously.
Z Energy (ZEL:NZX / ZEL:ASX)
Z Energy provided a sound update last week update delivering 1st half operating earnings of NZ$95m (modestly ahead of the mid-point of management guided NZ$85-100m). Guidance range of NZ$235-265m was also a 5% upgrade to consensus at the mid-point. Earnings could continue to improve, largely driven by cost out traction and fuel volume share gained in high margin premium petrol. ZEL reiterated their expectation for no dividend until the 2022 financial year – although at this time we estimate ZEL will pay a 10% 2022 yield on current prices.
ZEL’s first half results impacted by COVID-19 lockdowns and weak refining margins. Lockdowns impacted total volume with Jet yet to recover. Clearly with this morning’s vaccine news-flow ZEL would be a direct beneficiary. We move our rating to a High Risk BUY recommendation.
We will release a full update in our weekly report.
Australia & New Zealand Market Movers
The Australian market jumped to a 8-month high on Monday (ASX 200 Index +1.8%) with nine out of every 10 stocks traded higher, with miner Lynas Corporation (+5.9%) and Fortescue Metals (+6.4%) among the best performers.
Cannabis stocks also rallied, as Vice-President elect Kamala Harris has promised to decriminalise marijuana in the United States, at the federal level.
Investors are also betting on rising demand for lithium, copper and other metals used to make electric vehicles and solar panels, given the Biden administration's likely focus on climate policies. That boosted the share price of Pilbara Minerals (+11.4, Piedmont Lithium (+4.5%), Ioneer (+12.8%), and Orocobre (+10.1%).
The New Zealand market started a week with a large gain (NZX 50 Index +1.8%) and closed at a new record high as risk assets rallied in the wake of the US election results. Synlait Milk led the market higher for a second day, before it was put in a trading halt pending an announcement. Last week it announced it had settled a legal dispute and added a new customer.
AFT Pharmaceuticals rallied yesterday as it announced it has received a US Food and Drug Administration (FDA) complete response letter (CRL) covering its application for the approval of a tablet version of its Maxigesic® pain relief medication.
3 Things Markets Will be Watching this Week
- An early focus naturally will be on the strength of Trump’s lawsuits – and whether these threaten to rekindle election uncertainty.
- Locally, the week ahead is dominated by the RBNZ’s OCR review on Wednesday.
- Second wave COVID-19 news is back at the top of headlines with social distancing measures re-introduced across Europe.