Global markets were mixed to close the week (S&P 500 Index +0.01%) as reporting season started to ramp up in some of the major markets, while US stimulus talks and Brexit discussions between the UK and EU continued to show little sign of coming to an agreement.
Pfizer Inc. jumped after saying it could seek emergency-use authorisation for its Covid-19 vaccine in the U.S. by late November if the shot is shown to be effective.
The NZ Election took place over the weekend and Labour has conclusively won with a clear majority of parliamentary seats. The centre-left Labour government will be unencumbered by coalition partners to implement its policy platform. While policy has been light in detail, priorities will be NZ$40bn infrastructure investment, funding for apprenticeships, trades and enterprise training, and a commitment to a 100% renewable energy platform. Labour have already ruled out a Wealth Tax and a Capital Gains Tax on housing, although it will impose the pre-announced new top rate of income tax at 39% on incomes over $180,000p.a. We see little stock market impact from this result which was largely expected.
Bank of Queensland (BOQ:ASX)
BOQ shares Jumped last week after the bank announced a pleasing full year result to the market.
Bank of Queensland’s 2020 result beat market expectations, with stronger than expected net interest margin and loan repricing. BOQ reported a lower statutory profit of $115m and a dividend of 12 cents, representing 6 cents from first half profits and 6 cents from second half profits.
We are satisfied with the results and the efforts the bank has undertaken to grow the business momentum, maintain revenue growth and good margin management in this challenging environment. The bank’s cash earnings of $225 million was ahead of its expectations and their forecasts look conservative in light of emerging data. We are also pleased with the bank’s strong cost control in a difficult environment and the 3-basis point growth in its second half net interest margin (NIM). In our view BOQ remains well capitalised to withstand shocks from prevailing economic uncertainty.
With the better than expected results, we now see the downside to be limited with COVID‐19 provisions conservatively set, but good execution of strategy will be needed to deliver underlying profit growth. However, at this stage we see more value in Westpac (WBC) as our preferred banking play.
Australia & New Zealand Market Movers
The Australian market slipped on Friday (ASX 200 Index -0.5%) after a negative US lead and concern rising coronavirus infections in Europe will lead to lockdowns. In stock news, Rio Tinto shares were slightly lower as it said its third quarter iron ore production improved to be -1% below the same period last year.
The New Zealand market was lower on Friday (NZX 50 Index -0.4%) as the gentailers such as Contact and Meridian fell with investors cashing in profits post a strong share price run.
In stock news, SkyCity CEO Graeme Stephens told shareholders the casino operator won’t be back to normal for a couple of years, with virtually no international business because of the virus. Auckland performance in August has been consistent with trading experienced during May/June. Hamilton, Queenstown and Adelaide continue to trade ahead of management expectations with no change to prior guidance. Metro Performance Glass shares continue to recover as it announced a solid reduction in net debt and on the back of recent strength in NZ activity and earlier than anticipated return to operating profit in Australia.
3 Things Markets Will be Watching this Week
- The week ahead is dominated by corporate earnings in the US with key names reporting including Netflix, Tesla, Procter & Gamble, and Coca-Cola.
- In the US we will also see the release of 3rd quarter GDP figures and the last US presidential debate.
- Locally, CSL will host an investor briefing while Mirvac and AMP will provide quarterly updates and a number of companies are hosting AGM’s including Origin Energy, Crown, Magellan Financial, Webjet, and Qantas.