Global markets took a breather overnight (S&P 500 Index -0.6%) with hopes of stimulus before the election fading & as US banks were weaker on the back of initial 3rd quarter results.
Banks led losses overnight after JPMorgan said its surprisingly-good reserve release didn’t reflect a better view of the economy and Citigroup reported a jump in costs. Johnson & Johnson sank as the drugmaker paused its late-stage study of a coronavirus vaccine. As we move through 3rd quarter profit-results will remain closely watched by investors.
Telstra (TLS:ASX / TLS:NZX)
Telstra shares jumped +4% yesterday after chairman John Mullen said the board was prepared to temporarily overshoot its dividend pay-out ratio to ensure it continues to pay shareholders a dividend of 16 cent per share.
We currently have a BUY rating on TLS given its current valuation and attractive dividend yield of 5% in a low interest rate world. While facing a challenging year ahead we see upside over the medium-term from the rollout of 5G.
Australia & New Zealand Market Movers
The Australian market rallied to a 7-month high yesterday (ASX 200 Index +1.0%) as Telstra soared. A resurgent Wall Street and global technology rally saw record highs hit for market darlings Afterpay and Xero. Banks were also stronger as Westpac led the gains among the big 4 Aussie Banks.
Commonwealth Bank of Australia held its annual general meeting, with executives saying the bank was keen to restore its dividend. The bank suggested it could return to about three-quarters of its profit after the prudential regulator restricted payouts although no timing was assured. CBA boss Matt Comyn says his bank’s strong capital position is enabling it to deal with a range of scenarios as the economy recovers from the coronavirus pandemic.
Coal stocks suffered on the back of news that China was holding back imports. Although the full picture is unclear, coal traders in China confirmed reports on industry websites that some buyers had been told to stop purchasing thermal and coking coal from Australia. Fortescue led losses among the major mining stocks.
New Zealand shares rose for a tenth consecutive session on Tuesday (NZX 50 Index +0.8%) as low interest rates and hopes for fiscal stimulus lure investors into the stock market. Property stocks saw some support after Real Estate Institute of New Zealand data showed house prices jumping 11.1% and the number of sales up 37.1%
In stock news, Ebos Group rose after reporting its trading in the first quarter of the 2021 financial year exceeded expectations, with group revenue growing 6.5% and net profit up 15%.
Internet infrastructure firm Chorus was a touch higher after the Commerce Commission released a report detailing new regulation for fibre services in New Zealand that seemed more favourable for the company than the initial draft. The changes were not that drastic for Chorus, and the boards approach to dividend policy will be the key catalyst for the stock over the next 18 months.
3 Things Markets Will be Watching this Week
- US election developments will be followed closely by markets as we move closer to elections both in the US and NZ.
- US quarterly earnings season kicks-off, with key names reporting this week including JPMorgan, BofA, Wells Fargo, Citi, Morgan Stanley, Goldman, Delta Air, United Air and J&J.
- In Australasia, AGM’s are scheduled for CBA, Telstra, Ebos, Sky Television, BHP, Cleanaway, CSL, Aurizon, Perpetual and SkyCity