US stockmarkets rally in relief that the US election has largely been conducted successfully, plus NZ business confidence is stable for early November

Despite predictions of civil disorder, intimidation at polling stations and general mayhem in the US, the country’s presidential election has largely been conducted with few problems, which has come as a relief for financial markets.

While the final result is still to be confirmed due to counting delays, and the final outcome is much closer than polls had predicted, it seems increasingly likely that Joe Biden will become the next US president.

That has seen markets push higher as the risk of a deadlocked outcome diminishes. While the possibility of law suits being filed by the Trump campaign remains a possibility, the outcome of the election is becoming increasingly apparent, and markets have responded accordingly to the increased certainty.

Week to date, the S&P500 is up 7.1 percent (as at 6.30am Friday) all but wiping out last week’s losses of a similar amount while Brent crude oil futures are up 8.7 percent week to date.

The NZX50 is up 1.3 percent for the week while the ASX200 is up 3.5 percent.

The New Zealand dollar has gained 1.5 percent week to date.

Sanford net profit halves due to disappointing catches and reduced sales.

Fishing company Sanford has blamed a disappointing catch of prized Patagonian toothfish as contributing to its net profit falling by 46 percent this year.

For the year to the end of September, net profit fell to $22.4 million from $41.7 million last year. Revenue was also down 14 percent to $468.8 million.

The company has been hard-hit by reduced sales to restaurants as a result of Covid-19 while the final quarter was knocked further by a lower than expected Patagonian toothfish catch and the falling value of the livestock in salmon farms.

“The result this year is disappointing, and our markets continue to be challenging and difficult to predict because of the evolving covid-19 situation,” the company said in a statement.

Sanford said it had satisfactory cash collection and a strong balance sheet but would need to become more adaptable and match costs to the new environment.

The company will release its full-year result next Thursday.

Sanford shares fell sharply on the news closing down 7.2 percent at $4.92, a five-year low, and bringing their fall for the month to 13 percent.

Business confidence holding steady

Business confidence and firms’ own activity held steady in the preliminary ANZ Business Outlook for November.

Headline confidence was a net minus 15.6 percent, and the own activity outlook was a net 4.6 percent, both 0.1 of a percentage point below the October figures.

‘Own activity’ reflects the responder’s view on how their own firm will do in the immediate term.

“Both business confidence and own activity barely moved and remain at subdued levels but definitely in the ‘could be worse’ category,” said ANZ’s chief economist Sharon Zollner.

Investment intentions fell 5 points to a net minus 3.3 percent, but employment intentions improved 2 points to be a net minus 1.4 percent.

ANZ said the backward-looking indicators continue to improve. Compared to the same month a year ago, a net 3 percent of businesses reported higher activity, up 9, while a net 10 percent reported lower staff numbers than a year ago, an improvement of 4 points.

Capacity utilisation, which ANZ said is the survey’s best GDP indicator, lifted from a net zero reading in October to a net 8.2 percent of firms expecting an increase.

“Now that the wage subsidy has wound up and the lost summer for tourism looms large, business resilience will be tested,” Zollner said. “But it’s fair to say the starting point looks much more positive than looked likely a few months ago.”

BNZ profit down as loan provisions nearly triple

Bank of New Zealand’s annual net profit fell 25.4 percent after its charges for bad loans as a result of Covid-19 nearly trebled.

Net profit for the year ended September fell to $762 million from $1.02 billion a year earlier, with charges for bad loans jumping to $300 million from $114 million, a rise of 160 percent.

BNZ’s Australian parent, National Australia Bank, reported a 47 percent drop in annual net profit to A$2.56 billion with charges for bad loans jumping to A$2.76 billion from A$919 million with A$1.6 billion added in the second half, a jump of 200 percent.

Operating income fell 4.4 percent to $2.54 billion – with non-interest income down 20.8 percent – while operating expenses rose 3.7 percent to $1.18 billion.

Net interest margin dropped 6 basis points to 2.19 percent.

BNZ had provided $4 billion of support via business lending products and more than $6 billion in home loan support following the onset of Covid-19.

The bank’s mortgage book grew from $4.3 billion to $4.6 billion in the latest year with residential property investors accounting for 34 percent, up from 33.8 percent a year earlier.

Overall, the bank’s lending barely rose, up 0.1 percent to $88.1 billion while deposits rose 6.3 percent to $65.4 billion.

Prominent US economist says new stimulus package needs to really, really big

Nobel prize-winning economist Paul Krugman believes the US may need several hundred billion dollars a month for the foreseeable future to keep the economy afloat as the coronavirus outbreak continues to suppress prospects for workers and businesses.

Krugman, an economics professor and prominent New York Times columnist, said putting a total price tag on the size of the package is difficult but he stressed that it needs to be “really, really big” given that the US hasn’t managed to contain the virus.

The US enacted a $2 trillion package known as the CARES Act in March, but those benefits have either expired or will soon end. Negotiations for further pandemic relief has been at an impasse for months after Republicans and Democrats failed to agree on what should be in the package.

Democrats proposed another US$2.2 trillion relief package that includes funding for state and local governments, as well as extending enhanced unemployment benefits of an additional $600 weekly subsidy. Republicans, meanwhile, wanted a smaller deal that would focus more on payment to individuals and business loans.

Republican Senate Majority Leader Mitch McConnell who has won his re-election bid for a seventh term, said yesterday that the additional relief package would be his priority when the chamber reconvenes next week.

Hong Kong home listings jump as unemployment reaches a 15-year high

Hong Kong is seeing a surge in home listings as the recession and a security crackdown by China prompt more residents to sell their properties.

Listings at Centaline Property, the city’s largest realtor, have jumped 44 percent from a year ago to more than 26,000, the company said.

Many Hong Kong residents are looking to leave the financial hub amid escalating political tensions over China’s new national security law.

Rising unemployment sparked by the pandemic is also driving up listings. Unemployment has almost doubled in the past 12 months to 6.4 percent, a 15-year high.

The national security law that tightens China’s grip on Hong Kong has prompted some residents to seek an exit plan, with the U.K. among the most popular destinations. The U.K. has offered a pathway to citizenship for three million eligible Hong Kong residents.

Despite the increasing supply of secondary homes in the market, property prices remain resilient. Resale home values slipped by less than 1 percent since the start of the year, according to Centaline.

Tesla founder reveals the company almost went bankrupt two years ago

Elon Musk is likely to be an excellent poker player judging by a revealing comment he made this week in response to a question posed on Twitter

The Tesla founder tweeted this week that the company came within a month of filing for bankruptcy when it was struggling to bring its best-selling vehicle, the Model 3 sedan, to market.

“Closest we got was about a month,” he said when asked via Twitter how close Tesla got to bankruptcy. “The Model 3 ramp was extreme stress & pain for a long time — from mid-2017 to mid-2019. Production & logistics hell” Musk tweeted.

Tesla was in a serious cash crunch as losses mounted and it struggled to hit various production targets for the Model 3. But Musk hadn’t previously disclosed the company came so close to filing for bankruptcy.

Musk is well known for doubling down in situations that would see others folding.

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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