Global markets were mostly higher overnight (S&P 500 Index +1.3%), as US stocks rose on signs of progress in developing a covid-19 vaccine and as a spurt of multi billion-dollar deals lifted investor optimism. Gains were broad-based, with all of the S&P 500 sectors ending in positive territory with real estate and technology leading gains as tech stocks rebounded from the recent sell-off.
As we touched on yesterday, drugmaker AstraZeneca has resumed its British clinical trials of its covid-19 vaccine, one of the most advanced in development. Pfizer Inc shares also rose +2.6% after the drug maker and German biotech firm BioNTech proposed to expand their Phase 3 pivotal covid-19 vaccine trial and overnight said they anticipate to deploy a covid-19 vaccine to the public before the year-end.
Nvidia Corp jumped +5.8% and was among the biggest boosts for the S&P 500 and Nasdaq following plans to buy UK-based chip designer Arm from Japan’s SoftBank Group Corp for as much as $40 billion, in a deal set to reshape the global semiconductor landscape.
Tourism Holdings Limited (THL:NZX)
Tourism Holding (THL) shares surged higher yesterday +12%, after upgrading its earnings guidance for the 2020 financial year (ending June 2020). THL expect net profit after tax to be approximately ~$20m, slightly ahead of its previous guidance range of $17.5m to $19.5m, showing that despite initially heavily impacted by covid-19 it is adapting and handling the crisis reasonably well.
With continued out performance of vehicle sales particularly in the US, THL's net debt position of ~$128m (better than previously guided expected), and other cash preservation measures have allowed them to avoid a capital raise – preserving shareholder value.
We maintain our High Risk BUY rating on THL, given given their ability to avoid heavy cash burn in an extremely challenging period, with upside potential once international tourism recommences.
Australia & New Zealand Market Movers
The Australian market was up on Monday (+0.7%) recovering from last week's losses on the back of covid-19 vaccine hopes, as well as Victoria recording just 35 case, its lowest since late June.
Gains were broadly felt across most sectors helped largely by a push into the mining sector, while these were partially offset by Australian technology stocks which continued to sink lower, as investors remained wary around heightened valuations.
Macquarie shares were down -4.7%, after telling shareholders that it anticipates a -35% decline in its 2021 first half profit as well as 25% decline in second half profit due to challenging trading conditions created by the steepest bear market on record and delayed merger and acquisitions activity.
The New Zealand market edged higher yesterday (NZX50 Index +0.4%) as markets were relatively unmoved by Prime Minister Jacinda Ardern's announcement to extend current alert levels until at least next Monday next week.
Travel stocks were higher as the announcement benefited Air NZ as they will be able to operate without social distancing measures. Tourism Holdings led the market higher on its profit upgrade, while Kathmandu posted the largest loss down -2.5%, with the announcement not going down well with retailers.
3 Things Markets Will be Watching this Week
- COVID-19 related -flow remains key, with second wave and lockdown headlines, while US Congress debate what an extension of stimulus will look like.
- The key event this week is the US Federal Reserve Interest rate decision, which will be followed by Fed Chair Powell’s news conference.
- Locally, NZ’s Q2 GDP data and Australia’s latest employment data are both due on Thursday.