Global markets were up overnight, with the US market (S&P 500 index +0.3%) closing just shy of its record high as investor sentiment was once again boosted by a session of better-than-expected earnings reports. While investors are concerned about inflation, many companies have managed to pass costs on to customers and boost earnings per share on the company level and maintain margins.
Tesla rose +3.2% following a stronger earnings report, as it managed to deliver more vehicles than expected even with supply chain disruptions – with the stock briefly hitting a new all-time high. Netflix was up +4.4%, and HP rose +6.7% after both delivering strong earnings releases, while American Airlines added +1.9% after Federal aid helped boost their third quarter profit. IBM was down -8.2% after missing revenue, while AT&T slipped -1% despite its quarterly result beating expectations.
European Markets (Stoxx 600 index -0.1%) were a touch lower, as China’s property woes weighed down heavily on mining stocks, which offset optimism from a wave of stronger earnings results.
The return of travel remains an open question, and will likely be dependent on the vaccination rates of certain countries in a case by case basis. Interestingly, Auckland International Airport expects a full recovery in air travel sometime after 2023, but noted the Auckland lockdown has seen daily passenger numbers at half of what they were in its first year of operation in 1966. Global figures show markets that have re-opened such as much of Europe, Canada and the U.S – have seen demand surge and capacity rebound to within 15% of 2019.
Another company waiting for this re-opening is Tourism Holdings.
Tourism Holdings (THL:NZX)
Tourism holding shares were flat after holding their Annual shareholder meeting yesterday, highlighting the understandably challenging start to the 2022 financial year, with lockdowns in both Australia and New Zealand.
Management expect a loss for the 2022 financial year, but fortunately ruled out the need for further equity due to current trading conditions – with $200m in debt head room. They also have ambitious targets to hit their $50m net profit target within 2-years of the global tourism system operating in a pre-covid like manner.
We have a BUY rating on Tourism Holding with a high risk caveat due to near-term uncertainty, but we do think the provides the best value NZX tourism exposure at the current juncture – and better upside for when travel recommences and gets to near "pre-covid" peak levels.
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Australia & New Zealand Market Movers
The Australian market was flat yesterday (ASX 200 index +0.02%) following a day full of company AGM’s.
Tech and real estate stocks lead the market higher, while Energy and Consumer Staples were lower giving back recent gains and the major banks were mixed. Aristocrat rose +2.9% once trading recommenced as the market reacted positively to the Playtech acquisition.
Flight Centre fell -5.8%, after announcing a $400 capital raise due to uncertainty in around the travel industry despite easing covid restrictions. Other travel stocks also traded lower – Webjet (-3.1%), Corporate Travel (-2.3%) and Qantas (-0.7%).
Woodside Petroleum fell -2.3% despite posting a +19% increase in its September quarter sales and said that elevated gas prices are likely to remain in the December quarter.
The New Zealand market was a touch higher on Thursday (NZX 50 index, +0.1), on a quiet day of trading.
Most stocks were higher, as a number stocks that had been sold off recently edged higher as investors bough back in. Mainfreight was up +1.6% after temporarily slipping below $90 per share, with EBOS (+1.5%), Oceania (+1.4%) and Pacific Edge (+1.4%).
Meridian led the market up +3.5%, after stating its Hydro storage increased over the month of September, and South island power generator peer Contact was also up +0.7%.
A2 Milk was hardest hit down -2.6% following a news of second-class action suit against them – likewise its milk supplier Synlait fell -0.5%.
The strengthening Kiwi (which rose to above 72 US cents) didn’t bode well with exporters – Fisher and Paykel (-1.9%), Vista Group (-0.4%), and Pushpay (-0.6%) all trading lower.
3 Things Markets will be Watching this Week
- Key events this week include third quarter economic growth data (GDP) out of China and CPI (inflation) prints across Europe
- US Third Quarter Earnings Season kicks into gear this week.
- Locally, NZ CPI (Inflation) data is due as well as quarterly updates from listed companies, while the latest lock down restriction updates will be closely followed.
