Morning report

Tech Sell-Off Continues

Global markets closed mostly lower on Friday as the tech slide dragged on. US stocks fell and all three major US indices posted a third straight week of declines. Travel stocks slumped in the UK and Europe as virus cases surge. Asia ended in the green.

Wall Street posts third week of declines

US stocks closed lower on Friday as technology shares sold off for a third day in a row. The sector's decline on Friday was blamed on options expirations, as well as ongoing concerns over high valuations and the US Commerce Department's ban on transactions (including downloads) involving Tencent's WeChat and Bytedance's TikTok from Sunday, which made no mention of Oracle's (-0.7%) deal with Bytedance. That order was subsequently put on ice over the weekend, after interventions from Trump and a judge. The US consumer sentiment index rose to 78.9 in September, up from 74.1 in the prior month. The S&P 500 and the Nasdaq lost -1.1% while the Dow Jones fell -0.9%. Apple (-3.2%), Microsoft (-1.2%), Amazon (-1.8%) and Alphabet (-2.4%) were among the biggest drags on the indices. The other sectors finished in the red too, with healthcare (-0.1%) and financials (-0.2%) holding up better than most. Tesla rose +4.4% as analysts raised their price targets on the electric carmaker's shares ahead of its "battery day" event this week. Auto parts maker Aptiv (+6.8%) topped the S&P after a broker doubled their price target and said the firm has the potential to dominate vehicle architecture and active safety. Lowe's (-2.3%) and Home Depot (-1.7%) declined following broker rating downgrades. Cruise lines including Carnival (-5.9%) and retailers including Ralph Lauren (-3.7%) were weak.

Travel stocks slump in both UK and Europe

The Stoxx 600 fell -0.7% with travel, banking and auto shares leading declines as a resurgence in coronavirus cases across the continent rekindled fears. Caixabank (-2.2%) agreed to buy state-owned Bankia (-4.8%) for EUR4.3b to create Spain's biggest domestic bank. Swedbank tumbled -5.3% on fears that Swedish banks will bear the brunt of a recently proposed government "risk tax". Ericsson was up +1.3% after it agreed to buy US wireless networking company Cradlepoint in a USD1.1b deal.

The FTSE 100 slipped -0.7% as talk of a second lockdown did the rounds after new COVID-19 cases almost doubled to 6,000 per day. British Airways owner IAG (-14.6%), easyJet (-9.2%) and Carnival (-7.9%) all tumbled on the possibility of another lockdown.

Asian markets slightly higher

Asian shares were slightly higher on Friday despite some investor attention shifting again to uncertainties in global economies. The Shanghai Composite rose +2.1%, while the Hang Seng and Nikkei 225 inched +0.2% and +0.3% higher respectively.

The ASX 200 closed down -0.3%. Industrials led Friday's losses with a -1.7% drop, with Transurban falling -3.1% and Brambles down -1.9%. Health stocks were -1.0% lower, with market heavyweight CSL down -1.1% and ResMed off -2.3%.

The NZX 50 fell -1.2% as apple exporter Scales lost -5.5%. Tourism Holdings surged +9.8% after a solid result in the circumstances.

Crude and iron ore remained flat while gold rose

WTI crude remained flat at US$41.11, gold rose +0.4% to US$1949.69 and iron ore stayed at US$126.59.

NZ Headlines

Fonterra (FCG/FSF) shareholders and unit holders can look forward to an improved dividend next year based on the forecast earnings range, according to the co-op's chief financial officer Marc Rivers.

Fonterra's (FCG) potential exposure to a class action filed in Victoria in June over a milk price cut in 2015/16 is not possible to estimate, said the co-op.

Campervan rental company and tourism operator Tourism Holdings (THL) is recovering far better than expected in an economic environment uniquely devastating to its global portfolio. THL reported an underlying net profit after tax of $20m in FY20, down -28% on the previous year which is better than its previous post COVID-19 guidance of between $17.5m and $19.5m and in line with an update earlier this week.

Roughly a third of Warehouse (WHS) stores have agreed to plans to change their rosters as part of an overall restructuring that the company says is critical to adapting to the current retailing environment.

Today's Events

  • Briscoe Group ex div 9.0 cps

 

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This morning summary has been provided by Forsyth Barr Ltd and is for general information purposes only - your financial situation or goals have not been taken into account. If you would like more information or advice that is specific to you, talk to your Authorised Financial Adviser.