Global markets were mixed on Friday, but the US market ended the month on a high (S&P 500 Index +0.8%) experiencing its fourth consecutive monthly advance. The rally was led by a surge in Technology stocks, with Apple shares jumping +10% to all-time highs, once again becoming the world's most valuable company after reporting stronger than expected earnings, with revenues rising 11% from a year ago against analyst expectations for a decline.
The White House and Democrats continue to discuss the next virus-relief package as enhanced unemployment benefits expired on Friday. Familiar fault lines continue to separate the White House and congressional Democrats on the next coronavirus stimulus package a day after an extended meeting over the weekend. The key sticking point separating Democrats and Republicans continues to be the federal boost to unemployment assistance, which was set at $600 a week in March.
Key events this week include employment figures (Nonfarm payrolls) in the US, the RBA rate decision (no change expected) and another big week of corporate earnings. While tech stocks have been performing, at the other end of the spectrum Exxon Mobil and Chevron posted the worst losses in a generation after the pandemic and a global crude glut combined to batter almost every part of their businesses.
Covid-19 second wave news also remains in focus, as deaths in Florida hit a record for a fourth straight day, and cases in Arizona accelerated and the virus transmission rate in New Jersey jumped. Closer to home, Victoria has been declared to be in a state of disaster.
Tourism Holdings (THL:NZX)
THL shares jumped +10% on Friday as it outlined its updated plan to weather covid-19 and no international tourism.
THL is planning to downsize its fleet from 5,800 to between 4,200-5,140 campervans during as part of a move to support the balance sheet and shrink the business. Cost cutting and cash generating initiatives remain in focus including the vehicle reduction, staff cuts, rent reductions and direction compensation reductions, which helped more than halve costs from $24.7m to $14.5m May and June.
THL have done an amazing job avoiding a capital raise, and we maintain our High-Risk BUY due to THL’s ability to avoid further cash burn, but with the high risk caveat as they are not likely to be profitable again until international tourism returns.
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Australia & New Zealand Market Movers
The Australian market sold off on Friday (ASX 200 Index -2.0%) with all sectors losing ground, led by energy.
AMP shares fell by 12% after the embattled wealth firm flagged its underlying profit for the first six months of the year was expected to have more than halved. On the flipside, Super Retail Group closed 9% higher – the retailer behind Rebel, BCF and Supercheap Auto said it expected to report increased revenue and earnings for the past financial year.
Over the weekend – Victorian Premier has placed Melbourne into a State of Disaster as of Sunday evening with stage-four restrictions including an 8pm-5am curfew, non-essential business closures, travel and shopping restrictions, and compulsory face coverings all required. Regional Victoria will move to stage-three restrictions on Wed.
The New Zealand market was in positive territory on Friday (NZX 50 Index +0.3%) driven by strong performance by logistics company Mainfreight. Mainfreight's share price hit an all-time high of $46.95, on the back of strong financial results from its Australian business. In stock news, Briscoe Group shares were higher after a strong demand recovery (and online surge) in the second quarter of 2020 meant total group sales for the first half of $292.4m were only down -3.5% versus the prior period.
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.