Global markets were mostly lower on Friday (S&P 500 index -0.1%) as stocks pared losses as lawmakers passed a stopgap spending bill to avert a federal-government shutdown, but gave no signals of an imminent stimulus deal. In a volatile session markets remain focussed on vaccine news, stimulus & Brexit continues to dominate headlines
Virus cases continue to soar in US while first vaccines are due to be started from Monday in New York. The US FDA formally approved emergency use authorisation for Pfizer and BioNtech’s Covid-19 vaccine over the weekend. Distribution of the vaccine is expected to start today in the US (it has already commenced in the UK), with the head of the Operation Warp Speed unit saying over the weekend he hoped 75% to 80% of the US population could be vaccinated by June.
In other news, there have been strong warnings from EU and UK leaders that Britain could leave Europe without a trade deal, with London bank shares bearing the brunt. The pound fell after Prime Minister Boris Johnson and European Commission President Ursula von der Leyen both warned that a no-deal Brexit is looming on 31 Dec. There was some limited spill-over from Brexit concerns on Friday to other key asset markets, with the UK FTSE market index down -0.7%.
Briscoes (BGP:NZX)
BGP jumped +5% as it announced an intention to pay shareholders a special fully imputed dividend of 6 cents per share. The company has also repaid all of the $11.5m wage subsidy received from the government.
Management said trading has continued to be strong and Black Friday promotions produced record sales for the Group – unaudited sales for the third quarter period, being the thirteen weeks ended 25 October 2020, of $161.3 million, 14.97% above the $140.3 million. Briscoes BGP see the full year result exceeding last years $62.6m.
Q4 sales are expected to be announced on 9 Feb 2021 with full year results announced 16 March 2021. We continue to be surprised on the upside by results form the retailers, as consumers continue to spend on retail (potentially due to factors such as the inability to travel). We remain HOLD rated but BGP is our top retail sector pick for investors wanting a retail play.
Australia & New Zealand Market Movers
The Australian market slipped on Friday (ASX 200 index -0.6%) after CSL and the big banks weighted on the index, but investors still had a sixth week of gains.
CSL and the University of Queensland’s decision not to undertake a second trial of their vaccine candidate was the main story of the day. Some trial participants returned false positive results for HIV. The news CSL fell -3% but we do not think the news is material to the investment case.
oOh! media shares were up +3% as it provided a business update, including an update on market and trading conditions with third quarter revenues were 43% lower than the 3rd quarter 2019, while it expects its fourth quarter revenues to be 28–34% lower than the same quarter last year. However, it stated that performance has been heading back towards 2019 levels in its biggest revenue and audience reach formats: Road, retail and street furniture. Whilst there are emerging signs of a regional recovery, growth, promising digital penetration (now with a well-managed balance sheet) and cost savings firmly delivered, we believe the shares have priced a recovery at these levels, with the share price performance benefitting from a value rotation/investing.
Whitehaven coal has pleaded guilty to 19 charges and faces >$20m in fines for illegally drilling water bore holes, failing to rehabilitate drill sites and bulldozing land to build unauthorised roads at its Narrabri coal mine. The matter will return to the Land and Environment Court decision for submissions on penalty on 16 Dec.
The New Zealand market (NZX 50 index +0.5%) index rose to a new record on Friday as a volatile Fisher & Paykel Healthcare bounced back from a three-month low amid record high covid cases in the United States.
Electricity stocks fell having run up to all-time highs, with Meridian Energy the day’s weakest performer, falling -4% as investors cashed in some profits. Genesis Energy bucked the trend, which was largely excluded from the recent rally on account of its use of fossil fuels (which it is planning to divest). Interestingly, Meridian Energy and Contact Energy continue to pursue potential demand replacement options for Tiwai as its targeted August 2021 NZ-closure nears. The pair are co-funding a $2m study into whether green hydrogen production in the lower South Island is possible following strong international interest.
On the travel front, New Zealanders will soon be able to travel to the Cook Islands without having to quarantine for two weeks there, or on their return home. Officials from both countries are working together to put in place all measures required to safely recommence 2-way quarantine-free travel in the first quarter of 2021.
3 Things Markets Will be Watching this Week
- COVID related news flow, including vaccines are likely to dominate headlines for another week.
- Highlights this week include interest rate decisions from the US Federal Reserve, Band of Japan and Bank of England.
- The latest employment data in Australia is due on Thursday along with housing starts. Closer to home, the latest NZ migration print is due along with Q3 GDP and business confidence.
Team
