Global markets were mixed overnight as the US market (S&P 500 +0.3%) closed at a record high on Tuesday, rebounding from huge losses triggered by the covid-19 pandemic and crowning one of the most dramatic recoveries in the index’s history. Major technology names continued to rally, with consumer discretionary also performing well as strong US housing starts data added to optimism around the economic rebound.
The bear market that started in late February for the US S&P 500 is the shortest in its history. Trillions of dollars in fiscal and monetary stimulus have made Wall Street flush with cash, which among other things is pushing yield-seeking investors into equities. Amazon and other high growth technology-related stocks have been viewed as the most reliable to ride out the crisis – with the rally in part related to asset price inflation fueled by all the liquidity and low interest rates.
Fisher & Paykel Healthcare (FPH:NZX / FPH:ASX)
Fisher & Paykel Healthcare shares jumped +4% yesterday, after providing another earnings guidance for the 2021 financial year, once again silencing the critics. FPH is expecting net profit after tax to be between $365m and $385m, up another $40m from its previous guidance. This comes on the back of strong demand for its hospital respiratory care products to treat the growing number of covid-19 cases globally. Given rates of infection are still elevated we believe demand will continue to remain strong over the near-term, while FPH appears conservative that demand would start to ease and return to normal levels by the end of the year.
We maintain our BUY rating on FPH due to it being a quality business and as a hedge against covid-19 acceleration, but are wary around its valuation.
Australia & New Zealand Market Movers
The Australian market rose yesterday (ASX 200 Index +0.8%) recovering its losses from the previous session on the back of earnings season locally.
Healthcare giant CSL rose +4.4% after it said it was weighing up its ability to produce multiple vaccines, confirming it was in discussions with Astra Zeneca and the government on local production of the Oxford vaccine.
BHP shares dipped -0.5% after releasing underlying profit and the final dividend fell short of analyst consensus expectations, despite soaring iron ore prices.
Treasury Wine Estates' shares tumbled -14.3% after the Chinese Ministry of Commerce said it had begun an anti-dumping probe into wines in containers holding 2 litres or less from Australia after complaints from the local Chinese wine industry.
Westpac shares dropped -2.3% after it said it would cancel its interim dividend, with its third-quarter cash profit coming in below expectations at $1.32 billion, which weighed on the other big Aussie banks ahead of their quarterly updates.
New Zealand shares rose strongly again yesterday (NZX 50 Index +1.5%) on speculation of a negative interest rate environment lift which saw investors flock towards dividend paying stocks.
Summerset Group Holdings led the market higher for a second day, rising 6.4% on the back of reporting a strong result on Monday.
Mercury Energy was up +2.7% after increasing its dividend, despite the impact of low hydro storage and the covid-19 lockdown.
PGG Wrightson fell -2.6% after delivering its 2020 full year result which was inline with guidance, with the second half impacted by covid-19 causing them to cancel paying their final dividend.
3 Things Markets Will be Watching this Week
- 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.
- Across Australasia we are well underway in terms of companies announcing profit results.
- Locally, newsflow around lockdowns in Auckland and Melbourne/Victoria will also drive investor sentiment.