Santa Rally, RBA | Sky TV Soars

9 December 2021

Global markets were higher overnight, as US markets (S&P 500 +2.1%) rallied for a second day in a row as investors grow less fearful of the potential economic impact from the new omicron variant.

All sectors were up, with most making meaningful gains, Technology stocks leading the way as investors bought its recent dip – heavyweight Apple rose +3.5%, as well as its mega cap peers along with small growth stocks which saw the Ark Innovation ETF up +6%.
Intel bounced +4.0% on plans to list its US$50 billion Mobileye self-driving car unit. Vir Biotechnology jumped +4.0% after it and GlaxoSmithKline (+1.1%) said their antibody-based COVID-19 therapy is effective against Omicron.

European Markets (Stoxx 600 index +2.5%) were up sharply with tech stocks rallying 5.6% to lead gains, as all sectors and major bourses traded firmly in positive territory.

Closer to home, the Reserve Bank of Australia (RBA) held the cash rate unchanged at 0.1%, which came as no real surprise. Amid an economic recovery following lockdowns and surging inflationary pressures across the developed world, the RBA governor maintained that the impact of prices from global supply chain issues will prove transitory and Australia’s low wages growth mean underlying consumer price growth will not sustainably reach the midpoint of the bank’s 2-3% target before late 2023. Commenting on Omicron, it had created a new source of uncertainty but it was unlikely to affect Australia’s economy returning to its pre-delta recovery path. The RBA is well out of step with the RBNZ, and now the US Fed, and we see risks hat interest rates will rise faster than the RBA expect. 


Sky TV shares soared +17% yesterday after raising its raising its earnings guidance thanks to significant cost savings a stable revenue outlook, accelerating their plan to profitability.

For the 2022 financial year, Sky TV expects operating earnings to be between $150m to $160m, up +27% from last guidance largely driven by $40m to $45m in costs savings which is mostly recurring. Also helping revenue is improved pricing and bundling as seen customers willing to join up due to improved  “value’, as streaming services start increasing their pricing. 

An encouraging update shows SKT is able to survive against the streaming giants and deliver a meaningful profit and based on guidance figures Sky TV stock does appear attractively priced trading at ~8x earnings (net profit).
However, we still prefer to avoid the stock and remain HOLD rated given the uncertainty and difficult & competitive backdrop in terms of both streaming competition and the battle for quality content. 


Australia & New Zealand Market Movers

The Australian market was up yesterday (ASX 200 index +1.0%) rising for a third day in a row.

Gains were across almost all sectors as investors grew confident the omicron variant of covid-19 will not have the devasting impact that many first feared. 

Advances from the major banks helped firmed the market. Energy performed strongly thanks to a +5% rise in Brent crude, Tech stocks rebounded from its poor run recently, while Travel stocks were up on growing confidence international travel would recover.

Magellan Financial Group fell -6.4% after a surprise resignation of its CEO. 

The New Zealand market was a touch higher on Tuesday (NZX 50 index +0.1%) as positivity in global markets calmed the local market.

Sky City rose +3.3% after research showed average casino spending was at its highest levels 7 years, despite visitation levels still be low. Travel stocks were also up as omicron fears subside, on the flipside Fisher and Paykel slipped -1.3%

Fletcher Building announced it would it was launching a retirement living business called Vivid which would be integrated with surrounded community (not gated like retirement villages), Ryman healthcare sllipped -2.7% on the news.

3 Things Markets will be Watching this Week

  1. Key events this week US and China CPI (Inflation) data, and trade Data from China.
  2. Developments around the Omicron variant of covid will be dominating headlines. 
  3. Locally, the RBA meets to review its cash rate, earnings release from Metcash, and AGM’s held by Bank of Queensland and Pendal.
Global markets were higher overnight, as US markets (S&P 500 +2.1%) rallied for a second day in a row as investors grow less fearful of the potential economic impact from the new omicron variant.

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