Global markets were mixed overnight as the US market (S&P 500) dropped -2%, following a warning from a top US infectious disease expert. He expressed concerns that the US economy might be opening up too early given the virus is still not under control like it is here in Australia/NZ, with a real risk of a 'second wave'. This has been outlined by similar clusters which have reemerged in countries such as China, South Korea and Germany where lock downs have been lifted.
Overall, given the market recovery since March's bottom there is generally a lot of optimism priced into the market at current levels, so markets are sensitive to any piece of negative news at the moment. There is uncertainty on when the economy can open safely, and it will not at full capacity, with open questions around the rise in unemployment.
Z Energy Limited (ZEL:NZX / ZEL:ASX)
Z Energy (ZEL) edged higher yesterday after their trading halt which was prompted by a capital raise announcement along with a weak 2020 full year result.
This came in within their recently downgraded guidance as the fuel retailer struggled with intense competitions hurting fuel margins, even prior to covid-19. ZEL reported a net loss of -$88m, which included $96m of non cash impairment charges and a $33m covid-19 related costs and provisions.
ZEL plans to raise $350m, of which $290m was successfully raised from institutional placement, with the remainder from eligible retail investors. The capital raise and cost cutting measures put ZEL in a slightly less risky position heading into a challenging year as it deals with reduced demand across all fuel types caused by covid-19.
We current have a HOLD rating on ZEL.
Members should keep an eye out for our weekly where we will provide a full update on ZEL.
Australia & New Zealand Market Movers
The Australian share market fell (ASX 200 Index -1.1%) on Tuesday as trade tensions between China and Australia heat up, with Australia opting for an investigation over the cause of the covid-19 pandemic. In rebuttal China notched up economic coercion of Australia by targeting the beef industry, banning exports from four Australian abattoirs, following tariffs on barley exports.
BHP's CEO warned that the global economy will not recover as quickly as many anticipate, despite China showing signs of a V shaped recovery, he said the same is not be expected elsewhere. Also addressing concerns of cash flow, BHP still continues to sell its products and receive prompt payments.
The NZ market edged higher again yesterday (NZX 50 Index +0.5%) as investors remained buoyed by the reopening of the economy, with some with heavy movers on Monday giving back some gains.
Spark shares were up yesterday after announcing it had been allocated the first portion of the spectrum band for the 5G network.
Bunnings (which is owned by Wesfarmers) announced it will shut 7 locations largely rural branches which will affect 145 staff, while Burger King receivers plan to permanently shut five stores as it plans to sell the chain
3 Things Markets Will be Watching this Week
- Covid-19 and lock-down news-flow remains key in terms of market moves.
- Global earnings will continue to dominate headlines. Companies of note reporting this week include: Alibaba, Tencent, Vodafone, Sony, Honda Motor and Porsche.
- Locally, the RBNZ’s OCR decision along with the latest employment data in Australia are in focus. Earnings from Xero and a quarterly update from CBA will be watched closely.
Have a Great Day,