Global markets were sharply lower on Friday, but US markets did rebound into the close after being down over 4% at one point during the trading session.
Federal Reserve Chairman Jerome Powell said the central bank is monitoring the virus and will act as appropriate, adding that the “fundamentals of the economy remain strong”. However, US stocks still saw their worst week since the financial crisis more than a decade ago (S&P 500 -11% over the week).
The big unknown is whether Coronavirus represents a longer term loss of growth, or if a V-shaped recovery will offset growth lost. In past epidemics, the buy signal has been between one week and one month after daily infections peaked. We continue to watch developments.
Stock in Focus: Next DC (NXT:ASX)
Shares in Next DC were the standout on Friday in a sea of losses following the release of its half year results.
For the six months ended December 31, the data centre operator reported revenue of $97.7 million and underlying EBITDA of $50.9 million. This represents an 8% and 21% increase, respectively, over the prior corresponding period. Management has reiterated its guidance for the full year.
We currently have a BUY rating on Next DC.
Members should look out for a full update on Next DC to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian market fell on Friday (ASX 200 -3.2%) as the ASX suffered its worst day in over four years, closing the day at a six-month low. In stock news, Harvey Norman blamed bushfires and extreme weather for a subdued Christmas period as the retailer's first-half profit slipped by 4%. The furniture and electronics firm also warned on Friday it was bracing for a coronavirus hit to consumer confidence. Flight Centre has also slashed its full-year profit guidance amid the worsening impact of the coronavirus outbreak on the travel sector and as its first-half profit plunged.
The NZ market sold off on Friday (NZX 50 -1.5%) following global moves lower as the spread of coronavirus outside China continued, and the Ministry of Health confirmed a case in New Zealand late on Friday.
Tourism Holdings fell slightly as the campervan and tourism attractions company reported a half-year net profit of $13.1 million, down 25%. However, it reiterated its expectation of full-year profit around $24 million, a figure it forecast earlier this month, downgrading from $27.9 million. Port of Tauranga was lower as it trimmed its full-year profit forecast by $2 million on the back of reduced export log volumes due to coronavirus – the country’s largest port now expects full-year earnings of $94 million to $99 million. The port is starting to see the impacts of a trade slow down, particularly in the log sector.
3 Things Markets Will be Watching this Week
- Coronavirus news flow will continue to dominate investors’ attention in the week ahead.
- The Reserve Bank of Australia meets on Tuesday amidst increasing expectations they will take the opportunity to cut rates.
- Closely watched US economic data is released at the end of the week.
Have a Great Day,
