Markets try to digest the absence of the blue wave for a Biden victory and the long wait to see if he can build a blue wall in the north, plus NZ unemployment hits 5.3 percent

The scenario investors were hoping to avoid has become the new reality for financial markets with the outcome of the US presidential election too close to call and likely to be contested if Donald Trump ends up being edged out.

Several key races in battleground states remained undecided including Arizona, Pennsylvania, Georgia, Wisconsin and Michigan. It may take until Friday (NZ time) for all votes to be counted and a final result declared.

But one thing is already clear. This isn’t the Biden landslide that opinion polls suggested it could be and which markets had been betting on. Democrats have actually performed worse than pollsters predicted, and beyond their margin for error.

US stock futures were volatile overnight as the prospects of a quick, decisive result to the election faded, leaving investors on edge about the outcome. After initially slumping as a contested outcome looked likely, futures later edged into positive territory at the likelihood the Republicans will retain the senate thereby increasing the chances of a further economic stimulus package being finalised.

However, the main risk for markets is that Biden wins the presidency while Republicans hold onto the senate, creating a potential policy deadlock and a bitterly divided political landscape.

European markets were all weaker overnight falling by around 1 percent.

The US dollar ticked up 0.5 percent against a basket of top currencies, while demand for benchmark 10-year US Treasuries rose, sending yields lower.

The NZ dollar traded in a 1.4c range yesterday finishing the day at 66.26 US cents, down 1 percent.

The NZX50 closed up 0.6 percent yesterday at 12,200.

Pushpay’s forecast guidance disappoints investors

Donation software company Pushpay Holdings has announced a four-for-one share split to improve liquidity and attract new shareholders.

While the value of an individual shareholding doesn’t change as a result of a share-split, they have been a popular option this year with both Apple and Tesla splitting their shares and seeing a strong bounce in their respective share prices as a result.

Pushpay, ironically, has actually benefited from Covid-19. As the pandemic has spread through the United States, churches have been forced to close their buildings and have turned to online systems to live stream services and accept donations.

In its half-year report released yesterday, the company increased its full-year guidance for pre-tax and depreciation earnings to between US$54 million and US$58 million.

However, the guidance came in below market expectations with investors expecting the forecast to be above US$60 million which saw its shares close down 8.7 percent at $8.40, having traded as low as $7.90 intraday

In the long-term, Pushpay is targeting a market share of more than 50 percent of medium and large churches in the US, an opportunity that would deliver over US$1 billion in revenue annually.

Record spike in unemployment in September quarter

Unemployment rose by 37,000 in the September quarter to 151,000, the largest quarterly rise on record and the highest number of people out of work in eight years.

The unemployment rate spiked to 5.3 percent from 3.9 percent in June according to Statistics New Zealand’s latest employment data.

The under-utilisation rate – a broader measure of spare capacity in the labour market – lifted again, to 13.2 percent from 12 percent in the previous quarter and 10.4 percent in March. Wage growth eased to just 1.6 percent.

Analysing the report, Kiwibank said women were overrepresented in the latest figures. It also pointed out what it described as a “more worrying trend” that is seeing a growing number of women leaving the workforce altogether.

The number of Māori women employed in tourism fell dramatically, down 20 percent.

Kiwibank said the report confirms New Zealand is in a recession and that additional stimulus is required.

Z Energy reports first-half loss, but expects to resume paying dividends in 2022

Z Energy yesterday reported a $19 million first-half loss due to Covid-19 restrictions significantly reducing fuel sales, as well as additional contribution costs for the Marsden Point oil refinery which it part-owns.

The net loss for the six months ended September compares with a $22 million profit a year earlier. Pre-tax depreciation earnings fell 48 percent to $95 million while revenue fell 39 percent to $1.49 billion.

Most of the reduction was in jet fuel as a result of a dramatic fall in international flights.

Z Energy said cost-cutting initiatives delivered $36 million of one-off and ongoing operating savings during the period. Petrol and diesel demand had also recovered to pre-covid levels more quickly than initially expected.

After contributing $19 million to cover the refinery’s operating costs, Z said it booked a $14 million loss on the operation, compared with a $33 million profit a year earlier.

The company had raised $347 million of new capital in June and had previously committed not to pay a dividend before October 2021 as part of renegotiated banking agreements.

In its outlook for next year, the country’s largest fuel retailer forecast full-year pre-tax earnings of $235 million to $265 million and said it expects to resume dividend payments after the first half of the 2022 financial year.

Z Energy shares closed up 1.72 percent at $2.95.

Fulton Hogan says it will keep wage subsidy despite paying out $79 million in dividends

Fulton Hogan is the latest company to come under pressure for taking the Government wage subsidy while rewarding shareholders with $79.5m in dividends.

The infrastructure company’s latest annual report has revealed it after-tax profit rose 28 per cent in the year to June. It paid shareholders a 24 cent a share interim dividend in March, totalling $33.5m, and had set aside $46m for a 33c final dividend.

The company noted the final dividend was lower than last year’s 36c payment in light of the uncertain outlook brought about by Covid-19.

Fulton Hogan received $34.3m in wage subsidies, although the company said that at the end of September, following a full reconciliation, it made a partial reimbursement.

Companies have faced criticism for taking advantage of the wage subsidy scheme when they were profitable and paying dividends. Last month, retailer Briscoe paid back its $11.5m subsidy after being pressured to do so, while honey producer Comvita told shareholders it intended to pay back $104,000 of wage subsidies once it returned to profitability.

Others, such as retailer The Warehouse Group, also faced public criticism for taking the wage subsidy scheme while continuing with staff restructuring and redundancies.

Fulton Hogan said that it intended to retain the subsidy despite the improvement in its financial situation.

Chinese currency falls on US election outcome

While the outcome of the US presidential election is still not clear, Chinese currency markets have already become jittery at the prospect incumbent Donald Trump could pull off a second term, potentially increasing tensions with its major trading partner.

China’s yuan briefly plunged as much as 1.4 percent against the US dollar yesterday after former Vice President Joe Biden failed to win key states such as Florida and Texas.

The drop in the offshore yuan, where the currency is traded more freely, is the largest single-day percentage drop in almost three years.

The US election wasn’t the only factor that rattled the currency. Chinese regulators also just brought Ant Group’s record-breaking IPO to a stunning halt, increasing growing uncertainty surrounding Chinese investment.

Alibaba, one of China’s most successful listed companies, which owns a 33 percent stake in Ant Group, saw its Hong Kong-listed shares tumble by more than 7 percent in Asia trade yesterday. Alibaba shares on the New York Stock Exchange closed more than 8 percent lower yesterday.

Ant Group’s controller Jack Ma, executive chairman Eric Jing and CEO Simon Hu were summoned and interviewed by regulators in China, according to a statement from the China Securities Regulatory Commission.

UK punter bets big on Biden win

One UK punter has reason to be particularly nervous about the outcome of the US presidential election after placing a £1 million, or US$1.29 million bet on Biden to be the next president.

The bet was placed on the Betfair Exchange, the world’s largest online betting exchange, where gamblers find other gamblers who match their wagers.

US gamblers are not allowed to place legal wagers on the election, even as legal sports betting spreads across much of the country thanks to a 2018 Supreme Court ruling.

But wagering on the election in the United Kingdom’s legal betting market is soaring, setting up the US vote to be the most-bet-upon event in history.

The identity of the bettor, who placed the wager on October 29, is not known, but should Biden be declared the winner, the punter will collect a £540,000 (US$696,170) profit on top of getting the original £1 million wager returned.

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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