Global markets were higher overnight ((S&P 500 index +1.2%) supported by cyclical shares on hopes of a quicker economic recovery, while the sell-off in tech stocks moderated. Sentiment was helped by US regulators saying Johnson & Johnson’s Covid-19 vaccine is safe and effective. Europe and the UK rose, supported by strong German GDP data. Asia-Pacific markets fell.
Closer to home, yesterday saw the RBNZ keep all its policy settings unchanged and deliver the widely expected dovish missive along the lines of other central banks. While acknowledging a number of positive developments since its November update, the Bank claimed that the outlook remains highly uncertain.
That said, underlying the Bank’s projections was a clear sense that the easing cycle was over, with the Bank admitting that the recent resilience in the domestic economy implies that no significant additional stimulus is required. In a change to recent precedent, Governor Orr displayed no concern for the value of the NZD, noting that many of the export-oriented firms the Bank had spoken to have still benefited significantly. The market is now expecting a full 25bps hike by August 2022. The prospect of higher NZ interest rates saw the currency surge, and it is now trading at 74.5 cents versus the US dollar.
Sydney Airport (SYD:ASX)
Sydney Airport shares added to a strong run this week gaining another +2.5% yesterday, after delivering their 2020 full year result. No surprises as they reporting a major drop in passenger numbers down -74.7% from the previous year as a direct result of global pandemic, reporting a net loss after tax of $107.5m. SYD added they have done well to move fast and cut costs, and with help of the capital raise maintain a strong balance sheet with $3.5 billion of liquidity.
Management appear cautiously optimistic that 2021 will see the industry begin to recover as people are keen to travel and restrictions start to ease once vaccines continue to roll out across the globe – with vaccinations now being implemented in Australia.
At current valuation we remain BUY rated on SYD which will benefit from pent-up travel demand when international travel resumes.
Australia & New Zealand Market Movers
The Australian market fell on Wednesday (ASX 200 index -0.9%), weighed down by high flying tech stocks which failed to meet high expectations – given their inflated valuations.
Appen fell -12% after its revenue growth of +12% for the 2020 financial failed to deliver missing market expectations.
Data centre operator Next DC was a touch lower, down -0.8% after reporting record revenue of $121.6m for the first half of 2021 financial year, up +27% from the previous year, with earnings growth also up +29%.
Woolworths shares were higher (+1.05%) after as the retail giant reported a +10.5% increase in revenue and +15.9% increase in net profit after tax for its half year result resulting in its strong interim dividend in 6-years of $1.05 per share.
Blackmore shares surged higher +6.3% after reinstating its dividend after a one year hiatus as its half year net profit after tax rose +8% on the back of a +3% increase in revenue.
The New Zealand markets fell again (NZX 50 index -0.9%) yesterday as investors ignored RBNZ's promise to keep monetary policy loose as market continues to anticipate further tightening.
Exporters were hard hit as the kiwi dollar jumped to 74 US cents, with Fisher and Paykel Healthcare and Pushpay both down -3.5%, and A2 Milk down -1.5%.
PGW shares were up +6% after delivering a strong result for the first half of 2021 financial year which saw operating earnings (EBITDA) grow +21% from last year to $42.1m
Spark New Zealand fell 0.4% as border closures put on a damper on revenue fell -1.5%, due to lack of mobile roaming revenue. More importantly Spark maintained its 2021 full year dividend guidance of 25 cents per share.
Delegat Wine shares were up +5.9% after reporting another record result, operating net profit after tax rising +25% from last year to $43.1m for the first half of the 2021 financial year.
Auckland International Airport shares were also higher recovering from its sell-off earlier and on the back of Sydney Airport's optimism of potential (partial) recovery in the industry for 2021.
3 Things Markets will be Watching this Week
- Once again, corporate earnings dominate the week ahead on both side of the Tasman.
Key results include Bluescope Steel, Chorus, Freightways, Mercury NZ, Summerset, Woolworths, Vocus, Sydney Airports, Scentre Group, Meridian Energy, Spark NZ, Flight Centre, Qantas, Zip Co, Stockland, Afterpay, Ramsay Health Care, Air NZ, a2 Milk, Precinct Properties, and Genesis Energy. - The RBNZ’s official cash rate call on Wednesday will be a focus.
- From a macroeconomic point of view, investors will be keeping a nervous eye on bond markets as the growing chances of normalization on a global acceleration of vaccinations and rising commodity prices leads to a rise in bond yields amidst inflationary concerns. Vaccine & COVID news flow also continues to dominate headlines.
Team
