Global markets were mixed overnight (S&P 500 index +0.3%) helped by positive earnings and strong gains in cyclical and defensive sectors such as energy, material, industrials, consumer staples, healthcare and financials. Consumer cyclicals and technology stocks lagged.
Shares tied to an economic re-opening performed strongly on relaxed pandemic restrictions, as New York Governor announced most capacity restrictions will be lifted across New York, while New York City will resume 24 hour subway service later this month – which sent Airline and Cruise liner stocks higher. Berkshire Hathaway shares were +1.6% higher after reporting a +20% surge in operating earnings and continued to buy back large amounts of its own shares. Moderna jumped +4.3% after announcing it will supply 34m doses of its covid-19 vaccine to the global COVAX program.
On the flip[side, Tesla shares were weaker along with other major tech stocks, on rumours the EV maker's Berlin factory opening will be delayed until 2022.
European markets (Stoxx 600 index +0.6%) climbed higher as eurozone factory activity reached a record high for the month of April and Germany's retail sales data showed its biggest 12-month increased boosting sentiment.
Westpac Banking Corp (WBC:ASX / WBC:NZX)
Westpac (WBC) jumped +5% yesterday after showing a strong recovery in its 2021 half year result
Statutory profit increased by 189% to $3.44 billion and Cash earnings increased 256% to $3.54 billion. Core earnings were more or less flat, while the main contributor was significantly lower one-off notable items and an impairment benefit of $372m, reversing previous period write downs as loan quality and the economic outlook appears much more positive now than a year ag. This was a big reason why we were BUY rated on WBC.
Westpac reintroduced their interim dividend which would have been welcome relief and announced plans to fix their governance as well as simplify its business which includes a three year plan to lower its cost base down to $8 billion (a ~$2 billion saving).
We continue to remain BUY rated on WBC, as we believe there is still upside potential room to grow its dividend payout over the medium-term paying an attractive yield.
Australia & New Zealand Market Movers
The Australian market was flat yesterday (ASX 200 index +0.04%). Financials was the best performing sector, as all the major banks traded higher on the back of Westpac's strong first half result.
These gains were offset by losses across other major sectors, Technology, Energy ending the day down and major miners slipped lower on weaker commodity prices. ResMed the medical device company fared poorly, falling -4.4% after receiving a major broker rating downgrade following their third quarter downgrade.
Macquarie have reportedly expanded their wealth management business, with just over $100 billion in funds under administration, adding $21 billion in assets to its investment platform since March last year as the major banks exit the sector.
The New Zealand market edged higher (NZX 50 index +0.3%) on Monday, helped by lead dual listed Aussie Banks Westpac and ANZ.
Sky TV rose +3.5% after its competitor Spark (+1.7%) announced broadcast rights for UFC (mixed martial arts organisation) would be shared across the two streaming platforms. Fisher and Paykel healthcare was the major drag on the market down -1.7%, despite being a strong benefactor of the pandemic. it will be business as usual after the pandemic settles down.
3 Things Markets will be Watching this Week
- There are 140 S&P 500 companies reporting this week including PayPal, General Motor, DraftKings Inc, Wynn Resorts, AIG, Pfizer, Moderna Inc.
- Also this week in the US there is the release of monthly employment data (nonfarm payrolls) and the monthly ISM Manufacturing survey.
- Closer to home, we have the latest RBA interest rate decision, employment data in NZ and earnings from Westpac, ANZ, NAB, Macquarie Group and Z Energy
