US Retail Spending Boost | Bank of Queensland

18 April 2021

Global markets were higher overnight, with the S&P 500 index climbing +1.1% to hit all time highs as earnings season kicks off to a good start. There was a further boost driven by a jump in US retail sales for the month of March which was up +9.8% (ahead of forecasts for 5.5%) on the back of the $1,400 payments from the US government's latest stimulus cheques.

Technology, health care and communication stocks accounted for much of the upward moves – only energy and financial companies closed lower. Bank of America and Citigroup both reported stronger than expected earnings, unfortunately both fell as sentiment across the banking sector was weakened as the US 10-year yield fell 10bps down to 1.53%.  BlackRock, PepsiCo and UnitedHealth Group all reported bigger profits for the first quarter than analysts expected and climbed higher. Delta Airline shares were higher despite reporting a weak result, highlighting signs of confidence as they expect to return to making a profit by the end for the US summer if the recovery in air travel continues on its current trajectory.

Closer to home, Contact and Meridian shares are expected to sell off heavily today as the Blackrock Clean Energy ETF re-balances its portfolio, to heavily reduce its position in the two companies. We encourage investors to BUY the upcoming dip on Contact Energy once a large amount of volume is traded, or wait for the dust to settle on Monday. 

 

Bank of Queensland (BOQ:ASX)

Bank of Queensland (BOQ) shares edged lower down 0.8%, despite delivering a strong result for the first half of the 2021 financial year as cash earnings after tax came in at $165m, which was up +9%. This was driven by balance sheet growth, improved net interest margin (NIM), disciplined expense management, and lower loan impairment expense. In respect to its NIM, the bank’s NIM increased by 3 basis points during the half to 1.95%. This improvement was largely due to lower funding costs from reduced deposit rates and lower wholesale funding costs.

This solid performance led to the Bank of Queensland board declaring a 17 cent per share interim dividend, this was up 11 cents per share from the prior corresponding period.

We are currently HOLD rated on BOQ, and still prefer ANZ and Westpac as our banking exposures.

 

   
Australia & New Zealand Market Movers

The Australian share market was higher again yesterday (ASX 200 index +0.5%) on the back of strong economic numbers fueling equities. Australia Bureau of Statistics reported 70,700 new jobs created in March pushing the jobless rate lower to 5.6% from 5.8% in February. 

Miners being sensitive to economic growth expectations was the best performing sector, followed by energy.

Ampol (previously known as Caltex) shares were up +5.6% following a release of its 2021 first quarter update, earnings across all three major segments up, totalling $150m, all up on from the previous quarter, and up on the same corresponding period last year $142 (excluding significant items). Michael Hill jeweller rose +5.7% after telling shareholders its March quarter sales were up +12.4% from the previous year. 

Qantas shares dipped -0.2% after is reviewed up its fourth quarter domestic capacity estimate to more than 90% of pre-covid levels – driven by strong rebound in leisure travel. Looking ahead, current forecasting models suggest that Jetstar can achieve 120% of domestic pre-COVID levels, with Qantas at 107% for the 2022 financial year.

The New Zealand market fell on Wednesday (NZX 50 index -0.9%) as investors spared up cash for the upcoming sell-off in renewable shares

Genesis Energy saw the biggest decline, falling -3.2%, with 550,000 shares traded which would have freed up almost $2m for investors. Auckland International Airport slipped -2.6% with almost $10m of stock sold. But most volume was running through the two stars of the show which together saw 10m shares traded for a value of more than $72m — Meridian fell 0.8%, and Contact was down 1.5%.
 

3 Things Markets will be Watching this Week

  1. Reporting season in the US also kicks into gear with 24 S&P 500 companies due to report including JPMorgan, BofA, Citi, Morgan Stanley and Goldman.
  2. Locally, the latest employment data in Australia is due while the RBNZ meets on Wednesday.
  3. Bank of Queensland will release 1st half earnings on Thursday with quarterly updates due from Transurban, Mineral Resources and Auckland Airport. AGM’s are scheduled for Santos, Woodside, NZME and Seeka.

Team

Global markets were higher overnight, with the S&P 500 index climbing +1.1% to hit all time highs as earnings season kicks off to a good start. There was a further boost driven by a jump in US retail sales for the month of March which was up +9.8% (ahead

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