Global markets plunged overnight (S&P 500 Index -3.5%) as Technology stocks suffered a massive reversal, with the Nasdaq Tech index down almost -5% with star performer Tesla giving back -9% and Apple down -8%.
While US stocks recorded their worst day since June as investors bailed on technology stocks after their stunning rally, there was no clear catalyst for the sell-off. Our best guess is that the moves were profit taking, and putting things into context the US market has only retraced back to levels it was at a week ago. As such we see no need to panic.
Meanwhile, US health officials have told states to prepare for a Covid-19 vaccine to be ready by 1 Nov, an aggressive goal that suggests availability just before the presidential election.
SkyCity Entertainment (SKC:NZX / SKC:ASX)
SkyCity Entertainment Group led the NZ market higher yesterday, up 7% after it said it would pay a final dividend in late 2021 if there are no significant adverse changes to the current covid-19 status.
Despite reporting a normalised profit after tax fall of -60% to $NZ66 million in fiscal 2020 the result was better than analysts had been expecting, with strong increases in its electronic gaming machine business following the re-openings of its Auckland Casino.
This result surprised us, given the strength in domestic gaming underpinning the result. While SkyCity could be an interesting way to play a re-opening economy, on balance of risks we remain HOLD rated for now.
Australia & New Zealand Market Movers
The Australian market was higher on Thursday (ASX 200 Index +0.8%) as blue chip stocks lifted the market. Real estate investment trusts and infrastructure stocks were also on the rise, with a heavy fall in bond yields through the start of the week supporting bond-proxy assets.
Afterpay rose 1.6%, leading a mixed buy now, pay later sector, with a number of stocks still under pressure following heavy falls at the start of the week after payments giant PayPal unveiled plans to launch a buy now, pay later product in the US.
Buoyant equity markets and a stronger US dollar weighed on safe haven demand, pushing the price of gold lower and driving the local precious metal miners lower.
The New Zealand market (NZX 50 Index +1.3%) rose yesterday in a broad-based rally led by entertainment companies as the pandemic appeared to be coming under control in key markets.
Vista Group International rose another 4% after the United States’ biggest cinema chain AMC announced it would have 70% of its theatres open by the end of the week. The cinema software developer has rallied 43% since it reported better-than-expected earnings last Wednesday and the popularity of blockbuster release Tenet.
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.
- With reporting season all but over, focus in the week ahead returns to macro data including monthly employment figures (nonfarm payrolls) and ISM manufacturing data in the US
- The RBA also meets on Tuesday.
