Global markets continued to rebound overnight, with the US markets up another 6%, with the Dow Jones index experiencing its biggest 3-day gain since 1931.
The rally came even as US jobless claims surged to a record 3.3 million people last week. Federal Reserve Chairman Jerome Powell also sought to assure the public that the central bank wouldn’t run out of crisis-fighting ammunition, and the European Central Bank announced it will scrap limits on bond purchases for its emergency program, a landmark decision that gives it almost unlimited firepower to fight the economic fallout from the virus. We cannot avoid a global recession in the interim, but the actions provide support in time of crisis.
While financial markets have been turbulent, and volatility will remain very high, we see medium term buying opportunities amidst the wild swings. The key risk to our view is that global shutdowns last for an extended period.
Stock in Focus: Macquarie (MQG:ASX)
Macquarie’s share price has fallen around 40% since mid-February, reflecting a weaker medium-term earnings outlook and concerns around coronavirus.
However, we think MQG is a top-quality business that will likely rebound quickly when the market does recover. In that sense, we would be placing it on our watchlist as a stock to own once there is greater certainty around the impact of coronavirus globally.
Australia & New Zealand Market Movers
The Australian market rally continued on Thursday (ASX 200 index +2.3%), capping off the best three-day period for the benchmark index since January 2008.
CSL led the market gains, which saw a broadly stronger healthcare sector as Ramsay Health Care and Sonic Healthcare also climbed. Medical devices company Cochlear rallied after successfully completing an $880 million institutional placement which had been priced at $140 a share. The major miners were broadly stronger, as bulk and base metal prices firmed. Investors also look to be returning to Sydney Airport, as it rallied +10%, recovering slightly from multi-year lows.
The NZ market added to its rally yesterday (NZX50 +4%) with stocks that have been beaten up in the sell-off leading the bounce.
Travel technology business Serko saw its shares up nearly 50%, while rental campervan operator Tourism Holdings climbed 23%. Both have been hit hard given they are directly hit by containment measures operating in the travel and tourism industries. The retirement stocks were also significantly higher, although there are clearly large risks facing the sector with coronavirus.
Port of Tauranga was up even as it withdrew annual earnings guidance due to forestry exports being designated non-essential cargo. At the same time, it said “Many of our major exports, including meat, dairy products and kiwifruit, are classified as essential cargoes. Imports of oil products, food and medical supplies are also essential cargoes".
Metlifecare sank as investors question whether a $7 per share takeover offer will go ahead. Outside the benchmark index, Warehouse Group fell after the retailer apologised for jumping the gun in claiming its Red Shed stores were deemed essential services, and withdrew its earnings guidance.
3 Things Markets Will be Watching this Week
- Coronavirus related news-flow remains key in terms of driving investor sentiment.
- Moves from central banks globally in response to coronavirus,
- Corporate earnings guidance changes from Australasian businesses.
Have a Great Day,