Jarden Brief: How much travel bubble could boost NZ economy

Keeping you up to date with the latest market moves, in association with Investment firm Jarden

New Zealand

The S&P NZ50 index fell a slim 0.7 per cent yesterday despite Prime Minister Jacinda Ardern’s late afternoon announcement that the proposed travel bubble with Australia will open on the 19th of April.

The benchmark index’s progress was hindered by a fall in the utilities sector (which makes up a large proportion of the index), sliding 3.3 per cent. Gentailers Meridian Energy Ltd and Contact Energy Ltd were the market’s largest underperformers, falling 5.9 and 4.1 per cent respectively.

Contact Energy was likely sold down due to continued rebalances in the iShares Clean Energy ETF – with operator Blackrock owning more than 13 per cent of all outstanding shares (as of 31 March).

It was also in the news cycle after information regarding the purchase of geothermal specialists Western Energy Services was released to the public yesterday. Contact said the purchase will likely contribute to significant cost savings and compliment its new geo-thermal build at Tauhara. The cost of the acquisition has yet to be disclosed.

The second worst performing sector was healthcare, down 0.8 per cent. In contrast, consumer cyclicals and financials were in the green, climbing 1.3 and 0.7 per cent, respectively.

As expected, stocks with beneficial links to the opening of a trans-Tasman bubble outperformed index counterparts, with campervan rental company Tourism Holdings Ltd and Air New Zealand Ltd each making significant gains of 5.8 per cent. Air New Zealand seemed to be ahead of the curve, already increasing Australian flight capacity for late April even before today’s announcement. Auckland Airport also increased 1.3 per cent with passenger counts likely to improve through the reopen.

Assuming no interruptions, the travel bubble is expected to bring between 1 to 3 billion dollars into the New Zealand economy. Logistically, the bubble will be operated on a state-by-state basis where each will have an individually assessed risk level in the event of an outbreak (i.e., the bubble could be closed off to certain states and not others if cases were to rise). Lastly, travellers must not have tested positive for COVID-19 within the last two weeks before travelling and must not be awaiting the results of a COVID-19 test.

INTERNATIONAL
US Markets:

The S&P500 was trading flat at 4,080 points, at the time of writing. The DJIA declined slightly, down 0.2 per cent, while the NASDAQ increased 0.2 per cent.

Consumer Discretionary and Consumer Staples sectors had gained the most at the time of writing, up 0.3 and 0.1 per cent, respectively. Real Estate declined 0.4 per cent and was the worst performing sector.

At the time of writing, the best performing stock was biotech company Illumina, increasing 10.3 per cent, after announcing better than expected first quarter results. Illumina was followed by Enphase Energy, rising 6.8 per cent and global media firm Discovery, up 5.9 per cent.

The worst performer was human capital management solutions provider Paychex Inc, declining 5.0 per cent despite beating consensus earnings expectations in its report just before market open. Engineering firm Howmet Aerospace and video gaming giant Penn National Gaming were down 2.8 per cent.

Following the liquidation of Archegos Capital’s positions, Credit Suisse announced that Chief Risk Officer Lara Warner and the CEO of its investment bank, Brian Chin, will be leaving. Credit Suisse has allegedly incurred losses of around US$5 billion so far, while still recovering from the fallout of the Greensill collapse last month.

Tesla (+0.5 per cent) exceeded expectations for its first quarter with regards to vehicle production and delivery. On Friday, the company reported that it delivered 184,800 vehicles and produced a total of 180,338 Model 3 sedans and Model Y crossover SUVs.

On Friday, the US Labour Department reported stronger than expected numbers on the March labour market. Over the last month, nonfarm payrolls increased by 916,000 and the unemployment rate decreased to 6.0 per cent – likely driven by the economy slowly opening back up and vaccines being rolled out.

Rest of the world:

The Shanghai Composite was trading flat at 3,483 points, the Nikkei was down 1.3 per cent and the Hangseng increased 2.0 per cent.

The Caixin services Purchasing Managers’ Index (PMI) and composite manufacturing and services PMI improved month-on-month, rising to 54.3 and 53.1, respectively. The Chinese services sector profited from businesses hiring more workers and a general improvement in business sentiment.

G20 Finance Ministers and Central Bank Governors are set to meet today to discuss global economic, fiscal, and monetary issues, including health-related initiatives and the international tax agenda, among other topics. During talks, US Treasury Secretary Janet Yellen has called for the introduction of a global minimum corporate tax rate – with Japan’s Finance Minister Taro Aso welcoming this. Aso also agreed to support the expansion of special drawing rights, as long as the International Monetary Fund and World Bank ensure transparency of the uses of that money.

Commodities:

Gold was up 0.9 per cent to US$1,744.60. Oil increased 1.2 per cent to US$59.27, recovering from the sell-off in the previous trading session.

The total market value of cryptocurrencies surpassed US$2 trillion for the first time at the beginning of this week. Grayscale Bitcoin Trust, the largest institutional holder of cryptocurrencies, announced on Monday that it plans to convert the trust into an exchange traded fund, driving up the value of the currency. Despite this news, Bitcoin was trading slightly lower, down 1.3 per cent – possibly on news that China has introduced its own digital currency to combat the rise of cryptocurrencies.

The US 10-year bond yield was trading at 1.65 per cent, slightly below its 52-week record set last week.

Australia

In a green day for Australian stocks, the ASX200 closed 0.8 per cent higher yesterday. This rise was led by the Information Technology and Industrials sectors, which respectively rose 5.1 and 2.3 per cent.

The only two sectors to decline were Utilities and Energy, which fell a minor 0.2 and 0.1 per cent.

The top gainer was Cleanaway Waste Management which jumped 15.9 per cent following an announcement that they had proposed a A$2.5 billion takeover bid of Suez Groupe’s recycling assets in Australia.

Meanwhile, Afterpay rose 10.0 per cent yesterday following a positive session for US technology stocks on Thursday. Investors also responded well to an announcement on Easter Monday that their customer base in the US now exceeds 16 million people.

The biggest underperformer was Incitec Pivot, down 8.2 per cent. They announced yesterday that the recommencement of production in one of their ammonia plants is further delayed following a dry gas seal failure.

AMP, another underperformer, fell 4.9 per cent following continued management woes.
In macroeconomic news, the Reserve Bank of Australia reaffirmed their commitment to keep the cash rate at 0.1 per cent until at least 2024. This stimulatory monetary policy will continue to support Australian spending and the Covid-19 economic recovery.
ANZ Australian Job Advertisement Data was released yesterday and is at a 12-year high.

Job Ads rose 7.4 per cent month-on-month in March and are at their highest level since November 2008, post Global Financial Crisis. Investors may take this, combined with high employment in February, as a promising step in Australia’s Covid-19 recovery.

• For more information on the latest market moves, get in touch with Jarden.

Disclaimer: This Morning Brief has been prepared in good faith and reflects opinions and views at the time of publication, using external sources, systems and other data and information we believe to be accurate, complete and reliable at the time of preparation.We make no representation or warranty as to the accuracy, correctness and completeness of that information, and will not be liable or responsible for any error or omission.This Morning Brief is not to be relied upon as a basis for making any investment decision. Please seek specific investment advice before making any investment decision. Jarden Securities Limited is an NZX Firm, a broker disclosure statement is available free of charge at www.jarden.co.nz. Jarden is not a registered bank in New Zealand. Full disclaimer available at: https://www.jarden.co.nz/limitations-and-disclaimer

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