Global markets were up again overnight (S&P 500 Index +0.6% for its 4th straight day of gains), and the S&P 500 is now just 2% from its February all-time high. While uncertainty remains high, US earnings season continues to deliver surprises and covid-19 vaccine hopes are lifting sentiment.
Walt Disney shares jumped +8% after delivering a surprise profit for the second quarter, with the market expecting a massive loss due to revenue declines for Disney parks and media networks, which were not as bad as feared and offset by 100m paid subscribers joining their streaming network.
Novavak jumped +10% after reporting phase one vaccine trials results showed positive immune responses amongst patients. Johnson & Johnson edged higher after striking a $1 billion deal with the US government to manufacture 100m doses of its covid-19 vaccine candidate if it proves successful.
However, economic data continues to paint a mixed picture, as US services industry activity gained momentum in July, with new orders jumping to a record high, and then on the flipside hiring declined, supporting views that a recovery in the labour market is faltering.
Briscoes Group (BGP:NZX)
Briscoes Group (BGP) shares have been rebounding strongly lately, after releasing a surprisingly solid set of sales figures for the second quarter, which almost full offset the weak first quarter. For the first half of 2020, which includes 50 days of physical store lock down, group sales came in at $292.4m, down only 3.5% from last year, thanks to a +28.3% boost in sales in the second half helped by a boost in sales for many retailers and pent up demand built up post lockdown.
The result was helped by pent up demand post lockdown creating a surge in retail spending, however management appear wary over the near-term outlook with the risk of rising unemployment after wage subsidy support ends.
We remain HOLD rated on Briscoes, due to its valuation and uncertain outlook over the medium-term for the retail sector.
Australia & New Zealand Market Movers
The Australian market (ASX 200 -0.6%) fell yesterday, amid heightened geopolitical concerns and the US Congress' failure to agree on an extension of its fiscal support package.
There is local economic uncertainty with Victoria reporting another day of record high covid-19 cases, a week after entering into a strict lockdown.
There was broad based selling with almost all sectors in the red, other than miners which were mixed helped by gold miners as the price gold reached new record highs up +30% since the start of the year. The generally safe healthcare sector was the worst performing on the day lead by market giant CSL down 1.8%. The major banks were also trading weaker as well as Telstra which was down -2.3%, after announcing it was selling a data centre in Melbourne which it plans to lease back for 30 years.
The New Zealand market was a touch lower (NZX 50 Index -0.1%) yesterday as investors were reminded of the lingering uncertainty caused by the number of covid-19 cases continuing to rise globally. Local labour market data showed the unemployment rate fell to 4% in the second quarter of the year, defying expectations of a sharp increase. However, the figure is masked by government’s wage subsidies set to roll by the end of September, highlighting concerns of the economy over the near-term
Global logistics firm Mainfreight led the market lower, following a strong rally recently after an upbeat result. On the flipside, Ryman Healthcare continues to slip lower after it announced strict operating conditions in Melbourne are causing uncertainty over the build rate and earnings for the 2021 financial year.
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.
- Monthly employment figures are released in the US (Nonfarm payrolls) and it will be another big week of corporate earnings.
- Closer to home, the Reserve Bank of Australia makes an interest rate decision.