Global markets were higher overnight with the US S&P 500 (+0.4%) and European Stoxx 600 (+0.6%) higher driven by technology and growth stocks. The rally was fuelled by US Treasury yields falling following softer-than-anticipated labour market data, and the US Federal Reserve's minutes on Wednesday which showed the US's central bankers are still willing to support the recovery – given the current economic recovery is still uneven and incomplete.
Air NZ (AIR:NZX)
Air NZ shares have been ascending higher recently following the announcement of the Trans-tasman bubble commencing in less than two-week now.
Given cash burn there was an anticipation that they would require a capital raise. This has now been deferred another three months from June to September and over the interim AIR will be given an increased loan facility from the NZ government from $900m to $1,500m with improved finance rates at 3.5% and 5% (a cut from earlier rates of 7-8% currently being paid).
So far the facility draw down has been $350m. The delay hints that the capital raise may not be as large as many are anticipated, especially given future plans for AIR to be lighter carrier and being 50% owned by the NZ government who have more insight into border re-opening.
While things may appear to be promising for Air NZ we continue to remain HOLD rated at its current valuation considering they are still anticipated to be cashflow negative over the near-term, even with the Trans tasman bubble.
Australia & New Zealand Market Movers
The Australian market was up yesterday (ASX 200 index +1%) extending its strong start to the month on Thursday, hitting a fresh 13-month high, with strong gains from the miners and banks supporting the gains.
Solid gains from the big banks led the strong performance, Commonwealth Bank climbed +0.7% , NAB firmed +1.1% and ANZ rose +1.1%. This came despite ASIC launching a civil proceedings against Westpac, in relation to the sale of consumer and credit insurance products to approximately 384 customers who had not agreed to them.
The major miners were also among the market leaders, driven by strong iron ore prices, near-record high steel prices and margins are supporting iron ore prices, despite fears of more muted demand growth.
The New Zealand market rose on Tuesday (NZX 50 Index +1.2%) but is still down -3.7% from the start of the year.
A2 Milk was up +3.9%, as it rebounds from a three-year low as it struggled with disruption to its daigou channel. Fisher & Paykel Healthcare had a second strong day, up +3.6%, and Tourism Holdings extended its rally in the wake of the trans-Tasman bubble being announced earlier this week.
3 Things Markets will be Watching this Week
- The pandemic will remain in focus, but theme of US strength vs Europe looks set to continue, with further restrictions being placed on the AstraZeneca vaccine in Europe after reports of adverse side effects. As with the US, the UK is showing good signs, as it has vaccinated 47% of the population and will begin easing restrictions.
- The US Federal Reserve releases minutes from its latest meeting.
- Locally, we have the latest RBA cash rate call along with metrics for the 1st quarter from Summerset Group along with AGM’s from Scentre Group and NZX.