Jarden Brief: How a disputed US election will affect markets

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

New Zealand

The S&P NZ50 was 0.5 per cent higher on Tuesday. Larger companies outperformed as the S&P NZ10 rose 0.7 per cent while the S&P NZ Midcap index only rose 0.2 per cent.
Consumer Cyclicals and Industrials were the best sectors on the day, respectively up 1.5 and 1.3 per cent. Healthcare and Real Estate were the worst-performing sectors on the day, respectively down 0.6 and 0.1 per cent.

Payments solutions company Pushpay Holdings was the best individual performer in the index, up 4.6 per cent, albeit on low volume. Fletcher building also performed very strongly on the day, rising 3.3 per cent. Precinct properties led the index lower, down 2.3 per cent.

The Commerce Commission finalised its decision on how fibre optic service provider Chorus will be able to price its product from 2022 onwards. The constraints on pricing will mean that shareholders, who financed the construction of New Zealand’s ultra-fast broadband network, would not be fully rewarded for the risk they had taken on.
While the limited pricing is expected to lower internet prices, the wholesale pricing schedule is yet to be calculated.

Going forward, restrictions on price changes are going to limit the degree to which Chorus will be able to provide protection from inflation.

International

US Election Day has finally arrived with the markets surging as investors are optimistic for a clear winner to emerge from the election. At the time of writing, all three major indices are up over 1.9 per cent, with Facebook, Amazon, Netflix, Microsoft and Apple all up more than 1 per cent.

The world continues to watch the US closely as the political tension sets to rise into the polls closing. The potential for civil unrest is high, as shops in iconic locations such as Times Square and across the nation, have boarded up their windows in preparation.
A declared winner will be the best outcome for markets, although a dispute will not be a surprise.

A disputed result and potential unrest, that is dragged out into next week will likely rattle markets and may enhance volatility over the period.

All sectors are in the green as Financials and Industrials lead the way rising 2.7 and 2.6 per cent, respectively. Tech is also performing well up 2.1 per cent. The relative underperformers are Energy (+0.3 per cent) and Materials (+1.3 per cent).

Asian markets:

Ant group’s world record-setting IPO in Shanghai and Hong Kong has been suspended as the Group’s controller Jack Ma was summoned and interviewed by Chinese regulators.

The Shanghai Stock Exchange reported “significant issues”, suggesting it may not meet the conditions for listing or disclosure requirements.

The $34.5 billion IPO was set to be the largest on record.

Alibaba which owns roughly 33 per cent in Ant Group, saw its shares tumble over 6.5 per cent, at the time of writing.

It appears the setback didn’t impact the broader market as the Shanghai (+1.4 per cent), Nikkei (+1.4 per cent) and Hong Kong indices all had a strong day.

Meanwhile, China has ordered traders to stop purchasing at least seven categories of Australian commodities, lifting tensions with a key trading partner.

Commodities traders in China won’t be able to import key products with the government having ordered the halt to begin on Friday.

Commodities:

At time of writing, Gold was up 0.8 per cent, trading at US$1908 per ounce. WTI Crude was up 2.6 per cent, trading at US$37.77 per barrel. The US ten-year treasury yield was up to 0.89 per cent.

Australia

Australian shares rallied on Tuesday with the ASX 200 closing 1.9 per cent higher, as investors priced in a sweeping democratic win.

Stocks which could benefit from the enhanced US stimulus under a Blue Wave, such as international building materials company James Hardie (+3 per cent), and gambling machine manufacturer Aristocrat Leisure (+3.9 per cent) outperformed the index.

Beach Energy (+7.0 per cent) and Senex (+7.0 per cent) both rose strongly after announcing a deal in which Beach will acquire Senex’s Cooper Basin for a sum of A$87.5 million. The market has considered the deal beneficial to both parties, with the sale set to strengthen Senex’s balance sheet, while also making Beach Energy the sole operator in the region.

Meanwhile, Laybuy announced the launch of its Mastercard product, a digital BNPL card which claims to allow its clients to buy goods and services as easily as using a contactless card payment.

Yesterday’s rally was also buoyed by the RBA’s decision to cut their official cash rate to historic lows of 0.1 per cent, meeting general consensus. Aside from the rate cut, the RBA also announced its commitment to a substantial quantitative easing program, in which it will attempt to stimulate the economy by purchasing A$100 billion of government bonds with maturities of between 5 to 10 years over the next six months.

The Australian central bank put forward a more bullish outlook on the economic rebound, now expecting GDP growth to be approximately 6 per cent in the 2021 financial year and approximately 4 per cent in 2022 financial year.

Coming up today:

Fisher & Paykel’s US Competitor, Vapotherm is set to report their third-quarter earnings after market close today. Vapotherm’s result should provide read-through to Fisher & Paykel’s recent trading through second and third waves of Covid-19.

• 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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