Global markets were lower on Friday (S&P 500 index -0.7%) as traders assessed corporate earnings and hawkish remarks from a Federal Reserve official. For the month, the US market notched a 5% gain (S&P 500 index), while the NZ market was up 1.4%, and the Australian index was up +3.5%.
Breaking ranks with Fed Chairman Jerome Powell, Robert Kaplan, president of the Dallas Fed, said signs of excess risk-taking in markets show it’s time to start debating a reduction in bond purchases.
In stock news, Twitter fell 15.2% as the social media company posted a sluggish start to the year in its advertising business.
As we move through US earnings season, company profits look solid. Earnings wise, of the 301 S&P 500 companies that have reported, 88% have beaten earnings estimates (vs 71% last year) and 11% missed (vs 23% a year ago). On revenues, 68% have beaten while 11% missed (vs 45% and 26% respectively).
There are 140 S&P 500 companies reporting this week including PayPal, General Motor, DraftKings Inc, Wynn Resorts, AIG, Pfizer, Moderna Inc. As well as US earnings, the Aussie banks report this week which will be of interest to local investors.
SkyCity (SKC:NZX / SKC:ASX)
SKC has released a trading update for the 2nd half of the 2021 financial year which was consistent with trends outlined at 1st half result. As a result, there was no change to 2021 full year normalised earnings guidance of above 2020 (~NZ$200m) but well below pre-covid 2019 levels (~NZ$300m).
Based on expected performance and no prolonged property closures, SKC expects to meet its financial covenants for the 30 June 21 testing period and declare a final dividend inline with revised policy. SkyCity also said it would offer up to $175m in six-year bonds to pay off bank debt.
We currently have a HOLD rating on SKC and see the stock as fairly-priced.
Australia & New Zealand Market Movers
The Australian market lost ground on Friday (ASX 200 index -0.8%) in its heaviest loss of April, but investors may not be concerned after the best month since November, up 3.5% for April.The biggest losses were in energy shares, followed by information technology, materials and health.
In stock news, ResMed dropped -3.5% after it reported a net loss for the quarter of $US78.5 million ($100.9 million), largely driven by a $255 million provision for a tentative settlement with the Australian Taxation Office. Revenue was ~4% below estimates, with Americas in line, with Rest of World weaker than anticipated. ResMed indicated that the 3rd quarter of 2020 had US$35m of COVID-19-related sales that did not repeat this quarter. Going forward COVID related tailwinds will ease, and RMD expects sequential improvements in new patients diagnosis trends, high-single-digit growth in SaaS and continued strong mask and accessories re-supply in the US. The company has guided to double-digit revenue growth in the second half of 2022.
The New Zealand market was higher on Friday (NZX 50 index +0.2%) as shares followed US markets higher after better-than-expected earnings results by Apple and Facebook and strong economic data.
In stock news, New Zealand Rural Land Co jumped +6% as it said it had purchased 14 farms throughout South Canterbury and North Otago for $114m. These farms will then be leased back to their original owner with a rental agreement yield of 5%. Investors are no doubt pleased to see the company buying assets.
Chorus regulatory saga continues, with the Commerce Commission saying it will not finalise the Regulatory Asset Base (RAB) until mid-2022. While this should not be a major surprise, a further delay is very disappointing for CNU, with the ComCom likely needing to ready itself for any scrutiny by allowing enough time to properly consider fundamental building blocks for the new regulatory regime.
3 Things Markets will be Watching this Week
- There are 140 S&P 500 companies reporting this week including PayPal, General Motor, DraftKings Inc, Wynn Resorts, AIG, Pfizer, Moderna Inc.
- Also this week in the US there is the release of monthly employment data (nonfarm payrolls) and the monthly ISM Manufacturing survey.
- Closer to home, we have the latest RBA interest rate decision, employment data in NZ and earnings from Westpac, ANZ, NAB, Macquarie Group and Z Energy