Global markets were up overnight (US S&P 500 Index +1.9%) with the US closing higher on the back of the prospect of additional stimulus news and as a record jump in retail sales suggested the US economy could bounce back sooner than expected.
Data released by the US Commerce Department showed retail sales jumped by a record +17.7% in May, blowing past the 8% increase analysts expected. At the same time the Trump administration is anticipated to announce a $1 trillion dollar infrastructure package aimed at jump-starting the economy, adding a boost to investor risk appetite.
There has been promising economic data which suggests this recession could be much shorter and shallower than many fear. At the same time, a resurgence of new covid-19 cases in China and the United States, along with unabated progression of the pandemic in Latin America means we continue tread cautiously at current valuations (albeit the economic news has been a lot more positive than we expected)..
Harvey Norman Holdings Ltd (HVN:ASX)
Harvey Norman shares (HVN) were higher last week after releasing a better than expected sales update for its Australian business (like many other Aussie Retailers).
During the crisis only two franchised (Australian) Harvey Norman stores were closed with the remainder remaining open as it was seen as an essential service, and due to lockdown measures forcing people to remain home caused increase in demand for many of its household and electronic products, with sales for the first 5 months of 2020 up +17.5% from the same corresponding period last year. Unfortunately things were not as positive for its overseas operations all impacted by some form of forced lockdown.
Earlier HVN cancelled their interim dividend in light of covid-19 pandemic, however due to better than expected performance from its Australian business, announced a 6 cent per share special dividend.
We maintain our SELL rating on HVN
Australia & New Zealand Market Movers
The Australian market (ASX 200 Index +3.9%) surged higher on Tuesday, after an escalation in policy support from the US Federal Reserve spurred a sharp rebound in investor appetite for shares and assets higher up the risk curve – which had sold off in the last few sessions. This saw the banks and energy sector lead the market higher, with all sectors ending the day in positive territory.
It was also helped that the Reserve Bank said Australia's current economic downturn might be less severe than expected, while the overall outlook is still uncertain, with the pandemic expected to have "long-lasting effects" on the economy.
The New Zealand market was up yesterday (NZX 50 Index +0.8%) following increased investor confidence following the Fed's plan to buy corporate bonds, as well as stronger than expected Chinese economic data and an increased lending package from the Bank of Japan adding to the upbeat sentiment. Air NZ shares climbed higher after announcing plans to resume flights between Auckland and Shanghai (subject to government border controls in each direction) next week.
Ebos shares were higher yesterday, helped by The Seventh Community Pharmacy Agreement (7CPA) being signed which increased funding for the medical supply wholesale network by +9% to ~A$1.092 billion (~A$218m p.a) for the next 5-years.
3 Things Markets Will be Watching this Week
- Covid-19 related newsflow, namely the re-opening of economies around the globe and new case growth in Southern US States.
- Economic data including retail sales and a raft of housing data in the US along with a data dump in China.
- Locally, employment data in Australia and Q1 GDP in NZ will be closely watched.
Have a Great Day,
