Global markets were up strongly overnight (S&P 500 +2.7%), with positive news stemming from the US. Gilead released potential positive results from early tests of its covid-19 treatment, and a jump in oil prices supported energy stocks. The Federal Reserve left left interest rates near zero overnight and vowed to do what it takes to shore up the economy.
Tech stocks Microsoft, Facebook and Alphabet have released better than expected results and the tech sector rallied. On the flipside, Chesapeake Energy has been forced into Bankruptcy as the US oil and gas exploration and production company struggles with record low oil prices and virtually non-existent demand.
Markets are trending upwards, exhibiting a "V" shaped recovery, the question however is will the real economy be able to exhibit something similar, as markets and the economy appear to be slightly disjointed. We think markets are likely to remain volatile and there are risks around economies re-opening and a second wave of infections.
Crown Resorts Limited (CWN:ASX)
Hotel and casino operator Crown (CWN) saw its shares surge +11% after private equity giant Blackstone bought Melco Resorts & Entertainment's 9.99% stake in Crown for $8.15 per share. Despite nothing materially affecting the business, spurred rumours of a potential takeover offer.
There are suggestions Blackstone’s intentions are focused on spinning out CWN’s property portfolio, which including plant and equipment is valued on Crown’s balance sheet at over $4.6bn. In January, the Blackstone Real Estate Income Trust paid US$4.6bn for the underlying property of two casino hotels in Las Vegas, the MGM Grand and the Mandalay Bay. The trust also holds the underlying property of the Bellagio in Las Vegas.
While covid-19 restrictions may start to roll back we continue to remain HOLD rated, especially as a return in international visitors does not appear to be on the cards anytime soon.
Australia & New Zealand Market Movers
The Australian market (ASX 200 +1.5%) jumped higher yesterday driven by the banking sector, while energy sector made some positive ground as oil prices edged higher. Supermarket giant Coles shares fell despite reporting a +12.9% increase in sales, as panic buying drove sales supermarket and liquor sales.
Australia's Prime Minister also announced cabinet will meet the week beginning May 11th to discuss a possible removal of baseline restrictions, with a return back to normality. With international travel not likely to occur anytime soon, with a possible exception to New Zealand given how well covid-19 appears to be contained.
The NZ market (NZX 50 -0.9%) fell yesterday, with SkyCity Entertainment being the biggest winner of the day up +9.7% yesterday, on the possibility of relaxed measures in Australia benefiting their Australian complexes.
The New Zealand market is trading about 10% below its record highs, driven by two stocks which have directly benefited from covid-19 (A2 Milk and Fisher and Paykel Healthcare) which represent ~30% of the index.
3 Things Markets Will be Watching this Week
- Covid-19 and lock-down news-flow remains key in terms of market moves.
- US investors gear up for one of the busiest weeks of quarterly earnings reports, including from tech titans Apple and Microsoft. Closer to home, ANZ will continue a much anticipated reporting season for the banks with its 1st half result on Thursday.
- The US Federal Reserve makes an announcement on Thursday morning (AU/NZ time).
Have a Great Day,