Global markets were mixed overnight (S&P 500 Index -0.3%) with most major market indices lower, although the Nasdaq Technology index was 0.6% higher. The Nasdaq rose ahead of results from mega-cap technology companies and after Advanced Micro Devices announced a $35bn takeover of another chipmaker.
A mixed batch of corporate earnings did not help as concerns over the state of the economy in the US and Europe rise with the latest wave of COVID-19 cases. The European Euro Stoxx 600 index closed at its lowest level since May as worries around tighter COVID-19 restrictions on the continent overshadowed some better-than-expected earnings reports.
Spark (SPK:NZX / SPK:ASX)
In a possible white flag move from Spark yesterday in the sports media sector, Spark Sport is set to offer Sky Sport Now in a bundle for NZ$49.99 over summer, suggesting a neutral-at-best economic proposition for Spark.
Sky Network TV will not bundle Spark Sport at this stage but gets Spark pushing its product for at least 6 months. We can see the benefits for SKT in having SPK push its Sky Sport Now product during the tough summer months.
The two companies have been at odds over subscription sports services since Spark entered the market. SPK is no doubt hoping that bundling Sky Sport Now will help make the numbers work with a stand-alone largely domestic cricket product. The move could be the first step in a process in which SPK can offload its sporting rights to SKT. This is clearly not a positive indicator in terms of the success of Spark’s move into sport, however the division has a very marginal impact as a small part of Spark’s overall business.
We maintain our BUY recommendation on Sparks as it still looks reasonably priced and offers an attractive dividend yield of 5.4%. We have also long held a SELL rating on SKY, and see no reason to change this in the near term.
Australia & New Zealand Market Movers
The Australian market fell to a 3-week low yesterday (ASX 200 Index -1.7%) as sectors most exposed to the risks of rising COVID-19 cases were hit the hardest, including mining and energy stocks.
Bendigo and Adelaide Bank was a rare bright spot. Shares in the regional lender rose +2.3% following a quarterly trading update that noted a marginal rise in net interest margin and a 69% fall in the number of frozen loans from the peak recorded at the end of May. On the flipside, an update from Corporate Travel Management at its AGM added to selling pressure stemming from concerns about the pandemic as its shares fell -7.3%.
The New Zealand market sold-off sharply on Tuesday (NZX 50 Index -1.8%) as investor confidence was dented by renewed fears over the recent spike in covid cases.
Interestingly, mortgage lending hit $7.3 billion in September, the highest value on record, according to the latest Reserve Bank data, as the market continues to defy expectations.
3 Things Markets Will be Watching this Week
- COVID-19 news is back at the top of headlines with record case numbers across the US and Europe. In Europe investors are watching for signs of the impact on economic activity as social distancing measures are re-introduced.
- It is set to be a huge week of corporate earnings ahead with 189 S&P 500 companies due to report. Key names reporting include: Apple, Microsoft, Amazon, Alphabet, Facebook, Twitter, Vale SA, Exxon Mobil, Chevron, Pfizer, Merck, Gilead, UPS, Caterpillar and General Electric.
- We are one week out from the US election, with betting markets having Biden as a 65% favourite to win.