Global markets were lower overnight as US stocks slipped in subdued trade after a strong rally last week. We are seeing a reversal of last week with the Nasdaq outperforming while ‘virus stocks’ underperformed overnight. Investors continue to focus on unprecedented support from governments and central banks, with the US Federal Reserve announcing it will now buy “junk bonds” as its latest policy measure to support the US economy.
Corporate America launches into what is expected to be a painful quarterly earnings season this week due to the coronavirus pandemic. US companies start announcing their latest profit figures tonight with financials the initial focus. Key names reporting include: JPMorgan, Bank of America, Wells Fargo, Citi, BlackRock, Goldman Sachs, Morgan Stanley, Las Vegas Sands, Delta Air, United Air, Schlumberger and Johnson & Johnson. Investors will be watching company outlook comments to gauge the impact of covid-19, and we expect market volatility to remain elevated.
Metlifecare shares have tanked after announcing that the European buy-out firm EQT was backing out of the $1.49 billion takeover, executing their right to terminate the purchase agreement stating covid-19 is a "Material adverse Change". Metlifecare is taking legal advice to challenge the cancellation.
The retirement village operator now trades well below its last published NTA (net tangible asset valuation). This is the bottom of MET’s historical trading range over the last 7 years and the lowest in the sector – albeit all retirement village sector companies are trading at historic low valuations given risks around the sector from covid-19. In saying that, MET has the strongest balance sheet in the sector and has already wound back development plans. We are currently reviewing our HOLD recommendation on MET.
Members should look out for a full update on MET to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian market rallied on Thursday (ASX 200 +3.5%) into the Easter long weekend. The market was buoyed by a continued decline in new coronavirus cases domestically and a resurgence in companies that were among the hardest hit hardest during the market rout in March.
All sectors finished higher on Thursday, led by gains in excess of 5% for industrials and REITs. Media stocks were also in demand with oOh! Media jumping 19% to $0.76 on news that Here, There & Everywhere had acquired a stake in the company, leading to speculation over a possible takeover.
Interestingly, Commonwealth Bank chief executive Matt Comyn says there are early signs of a slowdown in the number of mortgage customers seeking to have their payments delayed, after initially being swamped with requests for assistance. Pharmaceutical business CSL reiterated its profit guidance for the 2020 financial year
The NZ market was lower on Thursday (NZX 50 -0.75%) as investors cashed in strong-performing stocks, including Fisher & Paykel Healthcare and A2 Milk, to pursue value in beaten up stocks such as the retirement village operators. Metlifecare rose 7%, bouncing back from a 17% slide the day earlier after a $1.49 billion takeover deal collapsed. While the big names declined, companies that have been hardest hit in the pandemic were stronger. SkyCity Entertainment Group jumped 9%, while Air New Zealand advanced 8% and Tourism Holding rose 4%.
3 Things Markets Will be Watching this Week
- Coronavirus related news-flow remains key in terms of market moves.
- US corporate earnings season kicks off this week.
- Capital raising announcements by companies are growing as companies ask for cash from investors in this uncertain period.
Have a Great Day,