Trump & COVID, Trans-Tasman Bubble | EBOS

6 October 2020

Global markets were lower on Friday as US stocks experienced a knee-jerk sell-off (S&P 500 Index -0.9%) in reaction to President Trump announcing he has tested positive for covid-19. 

A WSJ poll indicated 53% support for Biden versus only 39% for Trump. While Trump was said to be experiencing only mild symptoms, the president’s diagnosis adds to gloomy developments around the virus as big cities once again turn into hotspots. Betting markets now attribute a slightly greater chance of a Biden presidency, likely due to the disruption to Trump’s campaigning.  A Biden presidency is generally perceived to be negative for US equity markets because his policy platform includes raising the corporate tax rate, although the market reaction is far from certain.

At the same time, Trump's diagnosis could lead to compromise in stimulus package negotiations, but so far there are still conflicting signals on the prospects for reaching a compromise in Washington.

Closer to home, Australia is preparing to open its borders to New Zealanders to form a trans-Tasman bubble on 16 October, with NSW and Northern Territory the initial states that won't require quarantine for Kiwis arriving from NZ. The arrangement will initially be one-way with a two-week quarantine period still required for Australians entering NZ. Airlines have been quick to ramp up flights with an additional 12,000 seats offered by Air NZ, while Jetstar and Qantas are both selling tickets already while new routes to be opened once further Australian states open their borders


EBOS is reportedly among trade buyers for NZ's Ziwi Peak pet food business with potential private equity and trade buyers looking at a ~$400m deal.

EBOS owns the Blackhawk pet food brand and the Real Pet Food Company, and is among obvious trade buyers for one of the region’s hot young pet food. Ziwi Peak specialises in 100% natural, healthy pet food.

We have been and remain positive on EBOS, as we see the company as a well-run, defensive company which delivers healthy returns, consistently strong cash conversion and has a solid growth outlook. EBO management also have an exceptional track record with acquisitions.

Australia & New Zealand Market Movers

The Australian market sold off on Friday (-1.4%) following news US President Donald Trump has tested positive for COVID-19. The worst-performing stock on the ASX 200 was Mesoblast — the biotech firm lost -37% after the US Food and Drug Administration ordered an additional trial into one of the company's key treatments that is seeking US approval. Technology stocks had risen earlier in the session, following their US counterparts higher, but ended mostly lower as investors turned to safe havens such as gold instead.

The New Zealand market was more or less flat on Friday (+0.1%) as a fall in F&P Healthcare offset gains in travel related stocks Air New Zealand (+7%) and Serko (+5%) on the back of Trans-Tasman bubble news flow.
Interestingly, Barfoot & Thompson has reported its best September house sales in five years with 1099 residential properties sold, up +43% YoY. Prices also hit new record highs with the average price $996,945 and the median prices $930,000.


3 Things Markets Will be Watching this Week

  1. ​​​​​​​​​​​​​​​COVID-19 related-flow remains key, with second wave and lockdown headlines, while US Congress debate what an extension of stimulus will look like.
  2. US election developments will be followed closely by markets as we move closer to elections both in the US and NZ.
  3. On the central bank front, in Australia the RBA makes a cash rate decision and the US Federal Reserve released minutes from its last meeting.


Global markets were lower on Friday as US stocks experienced a knee-jerk sell-off (S&P 500 Index -0.9%) in reaction to President Trump announcing he has tested positive for covid-19. 

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