Global markets were higher overnight (S&P 500 Index +0.8%) as Wall Street’s main indexes continued to advance on signs of a working COVID-19 vaccine raised hopes of a faster-than-expected economic rebound, with technology stocks bouncing back from steep losses this week.
Closer to home, the New Zealand dollar leapt to a 20-month high (the NZD touched 69 cents versus the USD) as the market reversed its bet the Reserve Bank will cut the official cash rate into negative territory. Given the recent resilience of the domestic economy, many expect that the funding for lending scheme will now prove to be enough future stimulus, and that the RBNZ will keep the official cash rate above zero. The Reserve Bank also plans to reintroduce loan to value ratio restrictions on mortgage borrowers from March next year following a surge in the housing market. The RBNZ has sharply upgraded its house price forecasts for the year to December and now expects house price inflation of 9.6% for the full year as per the bank's latest Monetary Policy Statement.
Sky Network Television (SKT:NZX / SKT:ASX)
Sky Network Television shares jumped +6% yesterday after it raised its revenue guidance to between $680 million and $710 million due to growth in direct satellite customers and lower year-to-date annualised churn.
The mid-point revenue guidance of NZ$695m still represents a reduction from 2020 of NZ$53m. With SKT bringing the reseller customer base back and gaining traction on its customer service there are signs of encouragement. Operating costs remain stable although reducing this appears difficult from here. We remain SELL rated and would prefer to invest in other turnaround investments.
Australia & New Zealand Market Movers
The Australian market continues to rally on Wednesday (ASX 200 Index +1.7%), with the big stock news being Commonwealth Bank’s CBA) profit result.
Australia’s biggest bank, CBA, rallied after it reported a cash profit of $1.8 billion in the September quarter, down 16% compared with the same period last year. CBA said 46,000 home loan accounts were still on loan deferral arrangements in October, a big drop from where it was in June (at 125,000). CBA chief executive Matt Comyn says a successful and widely distributed vaccine will be a game changer for the economy and reboot the bank's results, which will benefit from the flow-on effects of travel and population growth.
InvoCare (IVC) has agreed to purchase shares of Family Pet Care and the business and assets of Pets in Peace for $49.8 million. The purchases will create a national footprint for InvoCare and will position itself as the market leader in pet cremation and pet afterlife services in Australia.
Xero saw its shares jump 6% to a record after it was added to the latest MSCI Global Standard Indexes, bringing in a flood of buying from passive index funds.
The New Zealand market was higher yesterday (NZX 50 Index +0.4%), with shares in global logistics company Mainfreight leading gains as it briefly hit $60 after the company gave its half-year report promising continued revenue growth in the second half.
Synlait Milk posted the day’s biggest loss, falling 8.9%, as it came off a trading halt after yesterday announcing it would raise $200 million through a share purchase plan and an underwritten placement at a fixed price of $5.10 per share. The milk processor also lowered its earnings outlook to be “to be significantly lower” than last year.
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.