Global markets were up overnight, (S&P 500 Index +0.3%) as investors eye US government stimulus to fight the economic fallout from the covid-19 pandemic. Both sides in Congress appear to have indicated that they agree on another $1200 stimulus cheque, but remain in deadlock on additional unemployment assistance.
Apple continues to charge forward for its 5 straight day in the green, and is now $120 billion away from the elusive $2 trillion in market value. The energy sector performed strongly as the price of oil edged higher.
In earnings news, Ralph Lauren and American International Group were down after reporting weaker second quarter results which missed market expectations. A rare miss considering about 83% of the 352 companies in the S&P 500 that have reported quarterly results so far have beaten market estimates for earnings, according to IBES Refinitiv data.
Closer to home, the RBA announced it will keep interest rates at a historical low of 0.25% until at least 2022 and rates will not rise until unemployment improves. The economic downturn has not been as severe as initially feared with a recovery now underway across most of Australia, however likely to be more uneven and bumpy given the outbreak in Victoria. While further monetary stimulus is possible, the onus now lies on federal, state and territory governments to provide targeted stimulus.
Ryman Healthcare Limited (RYM:NZX)
Retirement village operator Ryman Healthcare (RYM) shares fell -2% yesterday after announcing that it would be too difficult to determine how the new lockdown restrictions in Victoria will impact its earnings for the 2021 financial year. With a stricter 6 week lockdown there are heavy restrictions on allowable construction levels (and staff) on two of their Metropolitan Melbourne sites, while construction appears to continue as normal so far for two other sites outside of the Melbourne Metropolitan area.
While too early to predict with certainty, this will impact Ryman's target delivery of 900 beds and units for the 2021 financial year. We are on the more cautious side given added uncertainty around the property market, particularly in Australia over the near-term.
We remain HOLD rated on Ryman due to its rich valuation trading at ~2.9x its Net Tangible Asset per share.
Australia & New Zealand Market Movers
The Australian market (ASX200 +1.9%) climbed higher yesterday, helped by central bank support pushing the market higher while retail companies suffered, saying their operations were falling under Victorian restrictions to stop the pandemic's growth.
All sectors were up, which saw the growth stock momentum continued with the tech sector being the best performer, particularly the "buy now pay later stocks". Openpay Group shares closed 20.3 per cent higher at $3.91 after telling investors its payment service would be offered to golf club operators through a partnership with enterprise software company MSL Solutions.
The major miners continued their strong run as, as the price of iron ore rose +4.9% over night to 12 month highs. The heavy restrictions in Melbourne will force retailers to close their stores, with JB Hi Fi down -1.2%, as the retailer with the most exposure to Melbourne, while Kogan was up another +3% continuing on its strong run recently as an online retailer likely to benefiting from the shutdown.
The New Zealand market rose (NZX 50 Index -0.5%) on Tuesday, following a strong lead from Wall street as well as other Asian markets following strong US manufacturing data, as well as an added boost from a more upbeat outlook from RBA.
Investors remain cautious over elevated levels of covid-19 cases and this saw Fisher & Paykel Healthcare lead the market higher up +3.1%, as one company which benefits directly from surging covid-19 cases. Auckland International Airport fell -2.1% percent after Prime Minister Jacinda Ardern suggested the airport was getting ahead of itself as it readied a safe travel corridor between NZ and the Cook Islands
3 Things Markets Will be Watching this Week
- COVID-19 related news-flow remains key, with second wave and lockdown headlines, while US Congress debate what an extension of stimulus will look like.
- Monthly employment figures are released in the US (Nonfarm payrolls) and it will be another big week of corporate earnings.
- Closer to home, the Reserve Bank of Australia makes an interest rate decision.
