Global markets were higher overnight (S&P 500 +0.8%) as investors continue to look past widespread social unrest and pandemic worries to focus instead on easing lockdown restrictions and signs of economic recovery. Technology shares, along with cyclical stocks like industrials and financials lifted the market further, suggesting investor sentiment and the macroeconomic outlook is being seen positively. A crucial US jobs report later this week could paint a better picture of what is likely to pan out over the near-term.
Closer to home, the NZ government will provide the the type of rules and easing of restriction for level 1 today, which would then officially be confirmed and possibly start next week, potentially bringing the start date of level 1 forward compared to what was initially anticipated.
Infratil (IFT:NZX)
Shares in diversified infrastructure company Infratil (IFT) have been edging higher after releasing a better than expected result for the 2020 financial year which saw underlying operating earnings (EBITDAF) lift +13.5% from last year. The result was helped by a better than expected result from the recently acquired Vodafone business and the Canberra data centre also performing strongly whilst already being indicated to the market, with the flat dividend a welcome surprise given challenges facing Wellington airport and the Retire Australia business.
Given the ongoing uncertainty over the duration and impact of covid-19 IFT did not provide a group earnings of dividend guidance, and we expect weakness from some of IFT's businesses over the near-term, particularly Wellington airport. We can overlook this and continue to maintain a positive view on IFT as our preferred infrastructure holding given the stability (of the group) and long-term growth potential for some business lines.
We remain BUY rated on IFT
Australia & New Zealand Market Movers
The Australian market (ASX 200 Index +0.3%) edged higher yesterday with investors building on strong gains made at the start of the week after some reassuring comments on the economy from Reserve Bank of Australia (RBA) governor Philip Lowe. The RBA underlined that the economic downturn arising from the covid-19 pandemic may not be as bad as first feared, and kept the cash rate unchanged at 0.25%.
Standouts included Macquarie Group (up +2.6%) and Afterpay, (up +3.7%), while most of the market had priced- in this positivity earlier given the strong recovery recently and being partly subdued due to possible US China trade tension and protests.
The New Zealand market (NZX 50 Index +1.4%) rose strongly on Tuesday as Prime Minister Jacinda Ardern signalled New Zealand could be out of alert level 2 as early as Wednesday next week, while making up for closure on Queen's Birthday.
The market was led higher by shares which did lag behind in the recent recovery and are likely to benefit more from relaxed rules including Tourism holdings and Gentrack both up +11.9%, and other travel and attraction based stocks climbing higher. Retirement village operators were all up on positivity as they try to recover after still being down ~30% from the start of the year.
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,