Global markets rebounded overnight (S&P 500 Index +1.2%) as US stocks rose a day after their biggest rout in four months, with investors encouraged by better-than-forecast economic data despite growing coronavirus infections. European markets were flat as at the latest ECB meeting President Lagarde signalled more policy easing to come in December.
US economic output (GDP) rebounded at a stronger than expected +33.1% annualised rate in the July to September period following the -31.4% decline in the 2nd quarter. The faster rate of expansion was better than economist expectations (+32%) but still leaves the level of GDP 3.5% below where it was in the 4th quarter last year
Technology stocks outperformed ahead of earnings reports from Apple, Amazon, Alphabet and Facebook due after the close. Sentiment was also lifted by Pinterest's (+28%) upbeat forecast for sales and growth and Visa which beat revenue and profit estimates but did not provide guidance (a much better result than Mastercard a day earlier). The struggles continue for the energy sector, as Exxon Mobil said it plans to cut approximately 1,900 jobs in the US.
ANZ Bank (ANZ:ASX / ANZ:NZX)
ANZ shares dropped -2.4% yesterday as the broader downbeat tone overshadowed what were stronger second-half 2020 cash earnings.
ANZ reported its cash profit had plunged 42% to $3.76 billion for the year to September 30 as COVID-19 caused it to ramp up provisions against loans which could go bad as borrowers struggle to recover from the impact of the virus. However, this was well-flagged an expected by the market. Net interest margin was in-line at 1.63% and ANZ’s capital position was slight stronger than market expectations.
We recently updated our report on ANZ and while we think the industry will likely remain challenging the sector looks relatively cheap as absent an unlikely property market collapse risks to mortgages and secured business loans are fairly minimal.
Australia & New Zealand Market Movers
The Australian market (ASX 200 Index -1.6%) fell sharply yesterday after global markets tanked.
There is speculation that US-based PE and credit investment group Ares Management is in talks to buy AMP. It is understood Ares made an indicative offer to acquire AMP in full in recent weeks and has been given access to a data room and due diligence materials to firm up its bid. Seek fell -5.9% before being placed in a trading halt, after a short-seller alleged irregularities in the operations of the company's China business. Westpac skidded -2% even as it settled US class actions over historical bank bill swap rate trading. JB Hi-Fi was hammered -6% lower despite reporting sales in the Australian business jumped 26.7% in the first three months of fiscal year 2021.
The New Zealand market was lower on Thursday (NZX 50 Index -0.5%) but outperformed global markets which sold-off heavily the prior day. While the majority of stocks fell, Fisher & Paykel Healthcare was higher once again, softening the index loss.
In stock news, Freightways released a strong 1st quarter trading update with headline net profit up +43% versus the prior period, with the key driver being underlying volume growth from Express Package.
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.