Global markets were lower overnight as concern the recent rally had gone too far overshadowed new stimulus measures and encouraging economic data.
European stocks were lower even as the European Central Bank moved to add 600bn euros to its pandemic purchase program, more than expected. After exceptional gains for equities in the past week took valuations to the highest since 2000, some consolidation is to be expected as investors are searching for further tailwinds to drive gains. Markets are also awaiting plans for the next round of US economic stimulus, but Trump administration officials have postponed discussions scheduled for this week, according to people familiar with the matter.
CSL Limited (CSL:ASX)
CSL led the market gains for the ASX yesterday. The stock held up extremely well early in the covid-19 sell-off, but has underperformed over the last month.
There are some concerns that covid-19 is disrupting plasma collection, although we see this as only a temporary issue, and we believe CSL remains top quality medium term investment. On the flipside, there is talk that many governments are in discussions with flu vaccine manufacturers to increase supply in the upcoming flu season – which would benefit CSL's flu vaccine business Sequris.
We remain BUY rated and are buyers of this dip in share price. We will release a full update on CSL in our weekly report.
Australia & New Zealand Market Movers
The Australian market was higher yesterday (ASX 200 Index +0.8%) powering to a fresh three-month high despite another round of poor economic data, with local shares showing little sign of slowing down.
Blue chip stocks led gains while Qantas shares jumped +7% after the airline said it could ramp up domestic flying to 40% of its pre-pandemic capacity by the end of July. The airline said there was much pent-up demand for air travel and that it was already seeing an increase in customers booking flights.
Nufarm shares tumbled -11% after some analysts slashed their ratings on the stock to sell after management flagged the COIVD-19 pandemic was creating uncertainties and challenges in a presentation to the Credit Suisse 2020 London Chemical and Agriculture Conference.
The New Zealand market rallied on Thursday (NZX 50 Index +0.9%) for a third day as investors remain upbeat about the potential recovery from the pandemic disruption.
Tourism Holdings rose 7% as the government announced the company would receive $4 million to support its Discover Waitomo business as part of an effort to protect strategic tourism assets. There is also speculation that THL may attempt to merge with ASX-listed recreational vehicle company Apollo Tourism, to create an Antipodean RV powerhouse.
Air New Zealand rose 4% and Auckland International Airport advanced 3% as the national carrier announced its plans to increase operations to 55% of normal domestic capacity. The news coincided with progress on a trans-Tasman bubble with a detailed set of proposals due to be delivered to the New Zealand and Australian governments by the end of the week.
Vista Group International posted the day’s biggest decline, dropping -6% as the cinema software developer's recently rally stumbled following an indication that it would need to downsize its business to match the new operating environment.
3 Things Markets Will be Watching this Week
- Tensions between the US and China are becoming more animated as election polling in the US is tightening.
- Covid-19 and lockdown related newsflow remains key.
- US nonfarm payrolls along with ECB and RBA interest rate decision.
Have a Great Day,