Tesla Tanks, Trump vs China | Briscoes Group

11 September 2020

Global markets closed lower overnight (S&P 500 Index -2.8%) as US stocks fell for a third straight session on Tuesday as heavyweight technology names extended their sell-off.
The Nasdaq technology index fell -4.1%, as it heads back into correction territory, down -10% from its peak after an amazing run. Tesla (-21%) suffered its biggest daily percentage drop ever after the stock was passed over for inclusion in the S&P 500 index.

At session lows on Tuesday, Facebook, Amazon.com, Apple, Tesla, Microsoft, Alphabet and Netflix had collectively lost more than $1 trillion in market capitalization since Sept. 2. With all major sectors in the red,  traders sought the safety of haven assets, pushing 10-year treasury yields lower down to 0.68% and strengthening the USD, while interestingly gold slipped slightly down -0.2%. 

US and China relationship is also back in focus after President Donald Trump said he plans to end America’s reliance on the country. Trump also threatened to punish any American companies that create jobs overseas, and to forbid those that do business in China from winning federal contracts. In the U.K., the pound weakened and stocks slumped after Prime Minister Boris Johnson vowed he “won’t back down” over sticking points in Brexit trade talks with the EU.

Briscoes Group  (BGP:NZX)

Briscoes Shares were up +2.7% yesterday after reporting their half year result.
Despite covid-19, group sales declined by only -3.5%, with online sales up +99% from the same corresponding period last year, as they benefitted from pent up retail demand after the first 5-week lockdown.  Net profit after tax fell -1.3% from last year to $27.98m, widening margins with the wage subsidy helping to mitigate the damage to the bottom line, and BGP were able to raise the interim dividend from 8.5 cents per share last year to 9 cents per share.

We continue to remain HOLD rated as we view the post lockdown sales boost as temporary and there is still a lot of uncertainty around performance and the retail outlook over the medium-term.

Australia & New Zealand Market Movers

The Australian market climbed higher on Tuesday  (ASX 200 Index +1.1%), as investors shifted away from high flying tech stocks in favour of the banks miners, as well as health care giant CSL for better value and stability. 

Companies which took a major hit from covid-19 also fared better, as hopes for a vaccine being finalised soon saw the likes of Flight centre and Qantas rise strongly. Shopping centre owner Scentre rose 4.1% after saying its rent collections rose to 86%of monthly gross rental billings in August, a 4% increase on the prior month.

The New Zealand market also edged higher yesterday (NZX 50 Index +0.3%) in another quiet day of trading.

Sky Network Television led the local market higher again, up  +10.2% heading towards its earnings result announcement on Thursday. Restaurant Brands rose +0.8% after releasing their half year result, with net profit after tax falling -42% from last year to $11.4m, but this was better than expected given the five week full lockdown and following restrictions which meant they missed out on $40m of sales.


3 Things Markets Will be Watching this Week

  1. ​​​​​​​​​​​​​​​COVID-19 related news-flow remains key, with second wave and lockdown headlines, while US Congress debate what an extension of stimulus will look like.
  2. Key data this week includes US CPI, Eurozone Q2 GDP, the latest ECB interest rate review and exports/import data from China.
  3. In NZ, Sky TV, Briscoe Group, and Restaurant Brands will report earnings and Investore Property will host its AGM.
Global markets closed lower overnight (S&P 500 Index -2.8%) as US stocks fell for a third straight session on Tuesday as heavyweight technology names extended their sell-off.

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