Stock markets in the northern hemisphere shudder at the surge in Covid-19 infections and possibilities of lockdown, plus ANZ in New Zealand’ profit drops 27 percent

October, notoriously one of the year’s most volatile months, is living up to its reputation for US and European investors as this week looks set to become the worst five-day trading period for equity markets since March.

Stocks across both Europe and America fell sharply yesterday as the reality of new national lockdowns, skyrocketing infection rates and the grim winter to come in the northern hemisphere had investors on edge. The prospect of a disputed election result in the US next week and little likelihood of the much-anticipated fiscal stimulus package materialising anytime soon only added to investor concerns.

In the US, the benchmark S&P 500 Index is so far down 5.6 percent (as of Thursday) for the week amid a surge in Covid related hospitalisations while energy shares sank with oil prices. Technology stocks were also among the worst performers. Locally, the NZX50 is down a more muted 1.8 percent for the week so far.

Skellerup upgrades its forward guidance

Despite yesterday’s market slump, Skellerup was one of the few stocks to close in the green after chair Liz Coutts said she expects the rubber goods maker to deliver a strong increase in earnings in the 2021 financial year.

Skellerup’s shares jumped 4 percent to $3.09 on the news, a new all time high. Since hitting a low of $1.68 in April, Skellerup shares are up 84 percent, more than double the advance by the NZX50 over the same period.

Speaking at yesterday’s annual shareholders’ meeting, Coutts said she expects net profit to be in the range of $30 million to $35 million for the 12 months ending June 2021,  ahead of the 2020 result of $29.1 million.

“Our strategy of working closely with customers to provide engineered products that assure performance and often meet demanding food or water regulations continues to generate sustainable earnings growth,” she said.

Freightways delivers the goods

Freightways shareholders attending yesterday’s AGM had double reason to celebrate.

In a trading update, the company reported strong demand during the first quarter of the 2021 financial year, with revenue up 35 percent compared to the same period last year to $211.7m, and pre-tax and depreciation earnings increasing by 49 percent compared to last year, at $34.8m. Net Profit after tax was 43 percent higher than the first quarter of the last financial year, at $19.2m. However, the company noted these results also include its recently acquired Big Chill Distribution which did not form part of the Freightways group in the 2020 Financial Year.

Freightways shares closed up 1.8 percent yesterday at $8.40 and are now trading at the same price they were in mid-February before the start of the market sell off.

“Lift your game” Commerce Commission tells telcos

The Commerce Commission has told the country’s telcos they have to “lift their game” following a steep rise in complaints regarding fixed-line and mobile services.

Since the release of its November 2018 paper on the retail service quality framework, designed to curb customer dissatisfaction, complaints have actually increased by almost 25 percent.

The Telecommunications Dispute Resolution Scheme (DTRS) reported 2,802 complaints and enquiries so far this year compared to 2,489 throughout the entire 2019 calendar year, and 2,261 in 2018.

However, an ongoing blame game between the different parties makes the prospect of improving the situation anytime soon increasingly unlikely.

Vodafone argues many of the complaints about its fixed-line services relate to fibre broadband connections whose infrastructure is largely controlled and leased out by local fibre companies saying network operators Chorus, Northpower Fibre, Ultrafast Fibre, or Enable “should be held to the same quality standards that retailers are.”

Chorus spokesperson Steve Pettigrew describes this comment as “disingenuous” pointing out it is already a wholesale member of the TDR scheme and is held to the same quality standard as the retailers.

Spark NZ said it’s seen a “very pleasing reduction” in the number of service complaints.

“From June 2019 to June 2020, complaints and enquiries about Spark mobile services per 10,000 customers reduced by 33 percent and the reduction was a huge 48 percent for broadband” it said.

Last month, the commission sought more transparency from mobile providers, suggesting many consumers are on more expensive plans than they needed.

This latest initiative will focus on how the resolution scheme reviews the complaints process, the regulator said. Feedback is due by December 18, while general feedback on consumer pain points is due by February 26.

ANZ Bank profit hit hard by Covid

ANZ Bank has reported a 27 percent fall in its annual profit as charges for bad loans more than quadrupled and operating expenses rose 10 percent due to more expensive regulatory compliance and winding up the now dated Bonus Bonds scheme.

The country’s largest bank reported a $1.34 billion net profit for the year ended September, down from $1.83 billion the previous year.

The latest result includes a $32 million loss on the sale of UDC Finance plus a further $23 million loss from unwinding economic hedges of UDC loans. On the plus side, the year-earlier result included a $66 million profit from selling OnePath Life and a $39 million profit from selling Paymark.

ANZ’s Australian parent reported a 40 percent drop in annual profit to A$3.58 billion after A$2.74 billion of one-off charges that had been preannounced.

While the NZ bank won’t be paying any dividends for the year just ended following a Reserve Bank of New Zealand directive, the Australian parent declared a 35 Australian cent per share final dividend.

The annual 66 Australian cent payout is down from the previous year’s A$1.60 per share payout.

Charges for bad loans jumped sharply to $401 million from $99 million the previous year with $169 million added in the second half.

Chief executive Antonia Watson said the increase in these charges reflected changes in the economic environment resulting from Covid.

ANZ’s net interest income fell marginally to $3.23 billion while other operating income, including fee income, fell 25 percent to $820 million.

Luxury US jeweller Tiffany & Co set to be acquired by French group

High-end US jeweller Tiffany & Co has agreed with LVMH to slightly lower the price for its acquisition by the French luxury goods group, ending a bitter legal dispute between the two that threatened to derail the deal.

A new takeover price was set at US$131.5 a share from US$135 in the original deal, the companies said in a joint statement, bringing the total price tag for the transaction to about US$15.8 billion.

Both companies have also agreed to settle their pending litigation.

The new price means a discount of $425 million for LVMH, which is led by billionaire businessman Bernard Arnault.

The transaction, which has already been cleared by antitrust regulators, is expected to close in early 2021, subject to Tiffany shareholder approval.

Facebook CEO announces a week off for US staff

After a year that has seen Facebook fend of multiple critics, including from many of its own staff, regarding its content moderation policies, founder & CEO Mark Zuckerberg is attempting to boost staff morale by giving all US employees the entire week of Thanksgiving off, according to an internal message he sent on Wednesday night.

The note says that all employees around the world will get an extra three days off — either Monday November 23 through to Wednesday November 25, or other days for particular teams or geographical regions.

Facebook has faced an unusually tumultuous time internally. All employees have been working remotely since the early days of the coronavirus pandemic, and the company has instituted a wide range of policies around misinformation and political posts over a politically charged summer and in the run-up to the US elections next Tuesday.

In May and June, employees grew upset after Facebook decided not to remove a post from President Trump saying “when the looting starts, the shooting starts” in reference to widespread protests over the police killing of George Floyd, an unarmed Black man. As a result, Facebook later restricted how and where employees could express political views on internal message boards.

More recently, the company has rolled out a string of new policies related to the election, but has sometimes struggled to enforce them consistently, or to explain that enforcement to outsiders.

Earlier on Wednesday, Zuckerberg testified before the U.S. Senate Commerce Committee to defend Section 230 of the Communications Decency Act, which shields online platforms like Facebook from liability over material their users post and allows them to moderate content without fear of legal retribution.

Andrew Patterson is Newsroom's Markets Editor and has worked for decades as a financial journalist, radio presenter and editor with Australia's ABC, Radio Live and NBR.

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