Queenstown rents fall at double digit rates in May and June; Nasdaq hits fresh record high as Tesla surges; UK set to ban Huawei
What happened overnight: Technology stocks hit new record highs overnight as investors chased shares in firms seen as winners in a post-Covid world and pushed freshly-printed money into valuations. Tesla was briefly in the 10 most valuable listed companies overnight.
Printing machine: But some were worried about the US budget deficit, which soared in June to a record US$864 billion as Washington doled out huge sums of money to try to stave off a depression. The increase last month pushed the deficit to a record US$2.7 trillion, quadruple what it was last year and as much borrowing as a percentage of GDP as during World War Two. The US Federal Reserve is buying many of the Treasury bonds being issued through its Quantitative Easing or money printing programme.
In earnings news: investors welcomed Wall Street’s first major second-quarter results. PepsiCo shares rose around two percent after the snacks and drinks company reported revenues that fell less than analysts had feared as consumers bought more snacks and oatmeal to eat at home during the lockdowns.
BoJo vs Huawei: In Europe overnight, media reported British Prime Minister Boris Johnson is set to completely block Huawei from Britain’s 5G rollout with MPs expected to be told of his decision tomorrow. New Zealand’s security services are watching the UK decision closely.
Cheap rentals going: Many Queenstown landlords have been forced to adopt a “survival” mode in the wake of the coronavirus pandemic with rental rates plunging more than 10 percent in just two months according to new data from Stats NZ. Throughout the South Island, excluding Canterbury, new rental prices dropped 2.5 percent in June adding to a dramatic 8.6 percent drop in May — the biggest monthly fall in any region since the data series began in 2006. Stats NZ’s rental price index now records new tenancies in the region being an average of 9.5 percent cheaper than in June last year, even while new rental prices nationwide have increased 0.3 percent.
More pain to come: While domestic tourism in Queenstown was helping to soften the blow from the pandemic, property specialists say it’s possible that rental prices may have further to fall as the last of the wage subsidy ends with no immediate plan to restart international tourism.
South down, North up: By comparison, new rentals in regional North Island, excluding the two main centres, saw the biggest price hike, up 6 percent from June last year. Wellington prices fell 6.5 percent between March and April but gained 1.6 percent in June to be 1.4 percent above the prior year. The country’s total stock of rentals, new and existing contracts, rose 0.1 percent in June, and were up 3.4 percent from the prior year.
Green light given: The takeover of Augusta Capital by Australian based Centuria has been given the green light by independent valuers Calibre Partners (formerly KordaMentha). It said Augusta Capital’s shares are worth between 85 cents and $1 and so Augusta’s independent directors are unanimously recommending the takeover offer from ASX-listed Centuria in the absence of a higher offer.
Fair deal: Centuria is offering 22 cents in cash – raised from 20 cents on July 2 – and 0.392 Centuria shares for each Augusta share, valuing the offer at 91 cents per share. Centuria has already declared its offer unconditional after confirming last week that it had secured 65.9 percent of Augusta. Calibre Partners said the offer price is a 38.7 percent premium to the 68.5 cents Augusta shares were trading at on June 14 before Centuria said it was launching a new takeover offer.
No bubble anytime soon: Plans for the much anticipated Trans-Tasman tourism bubble are rapidly fading in the wake of escalating Covid infections in Victoria and now signs that Sydney and parts of New South Wales could also be forced to return to lockdown have seen tourism related listings weaken. Shares in Auckland International Airport fell 2.2 percent yesterday to a six-week low of $6.10. They had been as high as $7.21 just a month ago when plans for the bubble were looking more optimistic.
Others fall too: Other tourism related shares to weaken yesterday included Tourism Holdings down 3.7 percent at $1.83, Air NZ down 1.5 percent at $1.31 and SkyCity Entertainment down 0.8 percent at $2.39. Shares in cinema software group Vista International continued to weaken in the wake of the escalating virus situation globally. They closed at a two-month low of $1.27, down a further 2.3 percent.
A Retail NZ survey has found that 17 per cent of retailers have still been unable to negotiate rent relief with the landlords to cover the lockdown period and losses incurred by COVID-19. It said the announcement by Government that it would legislate to require fair rent relief and support arbitration had been welcomed by the retail community, as it got landlords and tenants around the negotiating table. Some retailers report that the stalling of this legislation has also led to negotiations stalling.
Yes we can: The government has come to the rescue of the Hawke’s Bay Airport providing a $4.5 million loan on commercial terms while the Napier city and Hastings district councils will provide a further $4.5 million to ensure the region’s air transport can survive through the covid-19 pandemic. The airport sought funding from its three shareholders to ensure it remained viable and to complete the redevelopment of its terminal. The government’s loan is expected to be repaid in two years and will protect around 200 jobs, including contractors working on the terminal.
Courgette’s off the menu: Courgette lovers might be forced to consider alternatives for a while with prices jumping 74 percent to an all-time high of $21.42 per kilo in recent weeks as imports from Queensland continued to be barred according to Stats NZ. All imports of fresh cucurbit, including courgettes from Queensland, were suspended in December last year due to the cucumber green mottle mosaic virus. It is still unclear when this trade suspension will end.
Food prices up slightly: Overall vegetable prices were up 7.6 percent in June, also influenced by seasonally higher prices for tomatoes, cucumbers, lettuce, and courgettes. These rises were offset by typical falls for winter crops including potatoes, onions, and carrots. Overall, food prices rose 0.5 percent in June, with higher vegetable prices partly offset by a 1.8 percent drop in fruit prices.
More taxes please: In a move certain to stir debate, a group of 83 of the world’s richest people, including Warehouse Group founder Sir Stephen Tindall, have called on governments to permanently increase taxes on them and other members of the wealthy elite to help pay for the economic recovery from the Covid-19 crisis. Those included in the list include Ben & Jerry’s ice cream co-founder Jerry Greenfield and Disney heir Abigail Disney. They have called on governments to raise taxes on the wealthy immediately, substantially and permanently.
Global poverty will rise: The group warned that the economic impact of coronavirus crisis will last for decades and could push half a billion more people into poverty. Other signatories to the call include the British screenwriter and director Richard Curtis and successful Irish venture capitalist John O’Farrell. The group released the letter ahead of this weekend’s G20 finance ministers and central bank governors meeting. They called on politicians to address global inequality and acknowledge that tax increases on the wealthy and greater international tax transparency are essential for a viable long-term solution.
It could get ugly: Second-quarter results for some of America’s biggest banks this week are likely to show their worst three months since the GFC in 2008/09. Earnings reports are expected to show a dramatic spike in provisions for loan losses along with falling consumer spending. Banks have been one of the worst performing sectors so far this year with the S&P 500 Financials index slumping 26 percent since the end of December. Trading and underwriting is expected to be the only silver lining for the banks, with forecasters predicting a jump in stock- and bond-trading revenues.