Global markets were mixed overnight as the US market closed a touch higher, led by the Technology sector which is now up over 5% year to date.
Investors are weighing up a new spikes in covid-19 cases in some regions such as South Korea, China, and Germany, creating the risk of a second wave of infections. Expectations around a weak economy and rise unemployment have for now been out-weighed by optimism of businesses reopening.
Closer to home, the New Zealand Government has announced it will return back down to level 2 this Thursday, allowing most of the economy to open up with some health precautions in place like social distancing and PPE. This means restaurants, malls, Cinemas, Shops, Gyms, Pools and Hairdressers, Domestic Travel, Professional Sports, will be allowed to commence with social distancing or PPE, and socialising with up to 10 people to allow for minimal potential spread of the virus while allowing the economy to open up in a safe manner. Schools and early childhood centres will reopen next Monday, while bars which are of higher risk may open on the 21 May.
Shares in retailer Myer (MYR) have rebounded as investor sentiment improves around the retail sector, as lockdown restrictions ease and on reports that shoppers are returning to malls with pent up demand. Myer announced an +800% increase in online sales over Easter, with retailer Kathmandu reporting a similar surge.
Myer shares were also heavily shorted, and these speculators may have been forced to close out their positions, adding to the relief rally.
Given Myer and most of the retail sector was in a challenging situation prior to Covid-19 we remain HOLD rated.
Australia & New Zealand Market Movers
The Australian share market jumped (ASX 200 Index +1.3%) on Monday after the national cabinet agreed on a framework for a staged lifting of restrictions, with the economy possibly fully open by July, with New Zealand included as a trans-tasman bubble partner. This saw travel retailed stocks jump with a the prospect of a sooner then expected recovery in domestic travel, while retail and property stocks also performed well.
The banks were up marginally but lagged behind the market as risks of default loom. While rumours float on potential buyers for Virgin Australia, which include Asia's largest budget airline IndiGo and private equity firms.
The NZ market was higher yesterday (NZX 50 Index +0.6%) welcoming the announcement of New Zealand heading down to level 2.
Sky TV shares led the market welcoming back a return to sports, while companies benefiting from domestic travel also performed well. Retailers also saw a sign of relief as physical stores could also reopen. SkyCity announced they will start to re-open their casino premises in level 2, while also revealing they have cut another 700 jobs.
Z Energy shares were put into a trading halt after announcing plans to raise $350m in fresh capital from shareholders in a bid to reduce debt and stabilise their business with an extremely tough year ahead, as it announced a net loss of $88m.
3 Things Markets Will be Watching this Week
- Covid-19 and lock-down news-flow remains key in terms of market moves.
- Global earnings will continue to dominate headlines. Companies of note reporting this week include: Alibaba, Tencent, Vodafone, Sony, Honda Motor and Porsche.
- Locally, the RBNZ’s OCR decision along with the latest employment data in Australia are in focus. Earnings from Xero and a quarterly update from CBA will be watched closely.
Have a Great Day,