Global markets were mostly in the green on Friday (S&P 500 Index +0.2%) with trading activity predictably subdued the day after Thanksgiving Day holiday in the US. The Nasdaq closed at a record high in a holiday-shortened week as retailers kicked off the year-end shopping season – with the clear trend being a shift towards online.
In other news, Britain is set to become the first Western country to approve a COVID-19 vaccine, with the independent regulator expected to grant approval within days for the vaccine developed by BioNTech and Pfizer.
Treasury Wine Estates (TWE:ASX)
Treasury Wine Estates plummeted -11% on Friday after Beijing said it would impose tariffs of 107–212% on Australian wine imports after alleging dumping into the Chinese market.
The move is not a huge surprise after China launched an investigation in mid-August. The new tariffs on Australian wine are the latest in a series of measures taken by the Chinese government recently as tensions between the two countries escalate. While China's Commerce Ministry did state the new measures are temporary, it did not say how long the tariffs will remain in effect.
Treasury Wine’s CEO expected to reveal his strategy today to replace over $500m in sales from China’s. The winemaker reportedly plans to redirect much of the premium wine once shipped to Chinese ports to markets in North America, North Asia and Europe. But it could come with potential redundancy and restructuring costs for its sprawling Chinese operations if the company decides to put the China business into hibernation until relations between Canberra and Beijing improve.
We had recently downgraded our rating on TWE for this very reason – as we saw the risks around China as too great and binary in nature, as well as being political and hence notoriously difficult to predict.
Australia & New Zealand Market Movers
The Australian market was lower on Friday (ASX 200 Index -0.5%) as ASX shares closed lower for the second consecutive session, but the Australian markets still eperienced a fourth straight week of gains, fuelled by optimism about coronavirus vaccines.
Interestingly, the JobKeeper wage subsidy in Australia is being paid to 700,000 fewer people than forecast in the 6 Oct budget. The Chair of Lynas was interviewed on Sky News over the weekend about opportunities ahead for the company noting: "we are in an exciting phase of growth” and "We are in a market that's exploding".
The New Zealand market was in positive territory on Friday (NZX 50 Index +0.3%). Fisher & Paykel Healthcare led the market higher as it recovered from a heavy bout of profit-taking after its annual result last Wednesday.
Air New Zealand continued to rise after it was awarded four months of additional cargo flights under the government’s International Air Freight Capacity scheme. Air NZ began with 23 cargo flights in the first phase of the scheme and will now run 55 flights weekly under the second phase, with potential for further increases.
Genesis Energy made headlines with the news it was considering selling its 46% stake in the Kupe gas field, but market reaction was muted.
3 Things Markets Will be Watching this Week
- COVID related news flow, including vaccines are likely to dominate headlines for another week.
- US economic data is due at the end of the week – including nonfarm payrolls and the ISM manufacturing survey.
- The latest decision from the RBA on its Cash rate target is due Tuesday.