Global markets were mixed overnight (S&P 500 index -0.1%) with the US market a touch lower, consolidating near record highs as investors weighed more strong US economic data against nervousness around the upcoming quarterly earnings season.
The IMF upgraded its global growth forecasts from three months ago, now picking 6.0% growth this year (previously 5.5%) and 4.4% next year (previously 4.2%). The IMF was particularly bullish on the US, with growth driven by massive fiscal stimulus – and noted that next year the US will be the only large economy to surpass the level of output it would have had in the absence of the pandemic.
Closer to home, The RBA announcement repeated its previous policy guidance – the Board does not expect the conditions for an interest rate hike to be met until 2024 at the earliest. Descriptions of the domestic economy were more positive, noting the recovery has been “stronger than had been expected” with the unemployment rate falling to 5.8% and the level of jobs returning to pre-pandemic levels. Despite this, the RBA still forecasts wage and price pressures to remain subdued.
The Australian and New Zealand governments have announced two-way quarantine-free travel across the Tasman will resume on 19 April. Arrivals will require a pre-departure health declaration and undergo random temperature checking at airports, while air crew must be separate from other international travel. An outbreak of COVID will result in a pause of up to 72 hours, while a serious outbreak will lead to a suspension of the travel bubble.
Coca-Cola Amatil (CCL:ASX)
Shares in Coca-Cola Amatil Limited (CCL) edged higher after Coca Cola European Partners (CCEP) increased their offer price from A$12.75 per share to A$13.50 – prompted by improvement in trading conditions in the fourth quarter for 2020, which has been approved by the Supreme Court and CCL Independent Directors’ and Group Managing Director’s have recommended that shareholders should vote in favour of the scheme at the higher share price.
This appears to be a more favourable takeover offer for CCL
Given the Takeover appears likely we downgrade CCL to a HOLD, and would see limited upside for shareholders at current levels and encourage current shareholders to vote in favour of the takeover due to the attractive price – well above our fair value (providing a low dividend yield at current valuation) and now sitting at an 8-year high.
Australia & New Zealand Market Movers
The Australian market was up yesterday (ASX 200 index +0.8%) helped by a rally across local technology stocks buoyed by strong lead from Wall street as well as an easing in global and domestic bond yields.
Afterpay rose +10% Zip Co. advanced +9.1% WiseTech Global firmed +5.2%, Nuix climbed +6%, Nearmap added +4.3% and Xero closed +3.2%.The major iron ore miners also supported the market gains, with iron ore prices rising amid surging global and Chinese steel prices.
Cleanaway Waste Management shares soared +15.9% after it reached an agreement to buy the Australian assets of French waste group Suez for $2.52 billion, the deal is conditional on the outcome of a broader takeover battle playing out in France between Veolia and Suez.
The announcement that New Zealand would open a travel bubble with Australia from April 19 supported the local travel sector. Webjet firmed +4.7%, Flight Centre advanced +4.4%, Qantas added +3.1% and Sydney Airport climbed +2.8%.
The New Zealand market drifted lower on Tuesday (NZX 50 Index -0.7%) as investors reacted to a new version of a clean energy index rules announced on Good Friday, that will reduce the weighting of Meridian and Contact.
Meridian Energy dropped 5.9% and Contact fell 4.1% , after the index builder has now moved to prevent similar liquidity shocks in the future by adding 70 new companies to the index and significantly reducing the weighting of the two Kiwi stocks.
Travel stocks saw a boost as the New Zealand government announced the long-awaited trans-Tasman travel bubble would open in two weeks, Tourism Holdings and Air New Zealand both soared 5.8%.
Kiwi Property Group climbed +0.4% after forming a second joint venture wiht Tainui Group to develop a central Hamilton shopping centre into a mixed-use retail, office, and potentially residential, precinct.
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.