US markets rally on increased political certainty and growing optimism of further stimulus. business leaders congratulate Biden

Investors’ worst fears a week ago of a disputed US election result and civil unrest didn’t pan out in the end. In fact, the US election turned out to be fairly orderly, all things considered, if somewhat delayed by postal ballots delivering a final decision. But US voters and indeed the world waited patiently until Sunday (NZ time) for the outcome to be formally announced and now markets begin the week with a new US President, a less volatile political environment, increased optimism of more stimulus and much greater certainty than was the case at the start of the month.

Last week markets surprised commentators after rallying on growing optimism the election would deliver Joe Biden as President, but a Republican controlled senate would limit the potential for wholesale changes in regulation.

However, if Republicans do manage to retain control of the Senate, investors still think additional stimulus measures can be passed quickly. But the package is likely to be smaller than in a “blue wave” scenario where Democrats control both houses of Congress.

An alarming spike in the rate of new Covid infections in the US, now averaging more than 130,000 new cases a day, could raise the potential for further shutdowns, which in turn will prompt an urgent round of new stimulus measures by both the incoming administration and potentially, the US Federal Reserve.

The Bank of England, which announced last week that it would increase its purchases of UK government bonds to £875 billion ($1.69 trillion) as the country enters a second national lockdown, faces similar concerns.

For the week, the S&P500 ended up 7.32 percent to 3509, making it the market’s best week since April.

The NZX50 gained 2.1 percent for the week to close at 12,337 while in Australia the ASX200 jumped 4.5 percent last week to close at 6190.

Commodity markets also pushed higher, with Brent Crude oil futures ending the week up 4 percent at US$39.45 a barrel and gold gained 3.6 percent for the week to end at US$1945 per ounce.

The NZ dollar also made solid gains last week in response to a weakening US dollar. The kiwi gained 2.4 percent to close at 67.73 US cents.

Metlifecare to repay wage subsidy

Metlifecare’s new board has decided to repay the $6.8 million wage subsidy the company received before it was taken over by Sweden-based EQT.

New chair Paul McClintock said that while Covid-19 had created significant and lasting economic uncertainty globally and in New Zealand, and Metlifecare did qualify for the scheme, EQT and the board had now determined that repaying the wage subsidy was the right thing to do.

EQT representative Ken Wong said: “EQT is very conscious this scheme was put in place by the government to support vulnerable businesses through a period of unprecedented uncertainty.

“Given the valuable work undertaken by all Metlifecare staff through the Covid crisis, and the essential nature of all Metlifecare employees, EQT believes that it is in the spirit of the scheme to return the subsidy.”

Synlait delivers some welcome news for investors

After seeing its share price fall by almost 30 percent since August, Synlait Milk was able to give investors some welcome respite on Friday after announcing the company, New Zealand Industrial Park Limited and Karl Ye have reached a settlement regarding the historic land covenants at the company’s Pokeno site which had been the subject of an ongoing legal dispute.

The company bought the land in February 2018, conditional on the seller procuring the removal of covenants which restrict the site’s use to grazing, lifestyle farming and forestry. A High Court decision in November 2018 removed the covenants after which Synlait acquired the title and built its factory.

However, the owner of adjacent land and his company, NZ Industrial Park, succeeded in getting that decision overturned in May last year. Synlait then turned to the Supreme Court, which has now been informed that a settlement has been reached.

Synlait CEO Leon Clement said both the company and New Zealand Industrial Park are committed to working collaboratively for the benefit and integration of the Pokeno community and are pleased to have resolved the issue.

Investors also reacted positively to news the company had secured a manufacturing supply agreement with an “established, global category leader,” which underwrites improved plant capacity use and also covers higher value products.

Synlait shares closed on Friday up 7.6 percent at $5.50.

Spark tells shareholders its new three-year growth strategy key to its future outcomes

Spark’s new three-point growth strategy based on sustainability, economic recovery and transformation, and digital equity was presented to shareholders at its AGM on Friday.

While the company gave itself credit for its response to Covid-19, it acknowledged it had lost high-margin mobile roaming revenue when the pandemic closed international borders and ironically was unable to cash in on the boom in broadband usage, due largely to its uncapped plans. As a result, its earnings were reduced by around $25 million.

However, the growth of its Skinny brand’s affordable mobile and broadband packages, its ongoing investment in new infrastructure, rural connectivity, and 5G networks were staple messages to shareholders who were forced to join the meeting online rather than in-person.

Chair Justine Smyth vowed to help close the New Zealand’s digital divide that had again been highlighted during the pandemic, saying that “when society is suddenly reliant on digital channels for the basics of life, it can be a stressful and frightening experience for those who are not connected.”

The company was less forthcoming about the performance of Spark Sport. Launched in March 2019, the sport streaming service aggressively offered a month free trial and a competitive monthly price of $19.99, which has since climbed to $24.99.

October’s announcement that Spark will offer Sky Sport Now in a new service bundle suggests the company wants to have an ‘each-way’ bet on its sports platform by offering a rival sports streaming service in a bundle less than two years into Spark Sport’s life.

CEO Julie Hodson said Spark would work to simplify its customer experience to be more “Uber-like”, as well as improve the company’s use of customer data, and investment in 5G. She promised Spark would have rolled out 5G to between five and seven locations by the end of the June 2021 financial year.

Hodson said by FY23 Spark wanted to be primarily wireless, digitally native and a leading cloud custodian.

Spark shares closed on Friday up 1c at $4.62.

US business leaders quick to extend their congratulations to President-elect Joe Biden

US business leaders and industry groups took to Twitter yesterday congratulating President-elect Joe Biden on his victory, while calling for the country to come together after a hard-fought and sometimes bitter campaign.

“Now is a time for unity. We must respect the results of the U.S. presidential election and, as we have with every election, honour the decision of the voters and support a peaceful transition of power,” said Jamie Dimon, CEO of JPMorgan Chase.

Facebook COO Sheryl Sandberg said America had taken “a big step toward creating a government that reflects the diverse country we are.”

“Congratulations to Kamala Harris on this remarkable achievement — shattering glass ceilings and norms around what leadership looks like — and to President-Elect Biden on this historic milestone,” Sandberg wrote in a Facebook post.

Corporate America had largely been supportive of Biden in the run-up to the election. A survey of CEOs conducted by the Yale School of Management in late September found 77 percent of participants would vote for Biden while more than 60 percent predicted he would win.

China’s economic rebound continues in the third quarter

China’s exports grew at the fastest pace in 19 months in October, while imports also rose.

New data shows the world’s second largest economy continued to recover after being hit hard by the coronavirus crisis earlier this year.

Exports in October rose 11.4 percent from a year earlier, beating analysts’ expectations of a 9.3 percent increase and quickening from a solid 9.9 percent increase in September.

The surge in exports pushed the US trade surplus up to US$58.44 billion.

China’s trade surplus with the United States widened to $31.37 billion in October from $30.75 billion in September.

China’s exports have stayed largely resilient amid the Covid-19 global pandemic, as strong demand for medical supplies and reduced manufacturing capacity elsewhere worked in China’s favour.

China’s exports could stay strong in the rest of 2020 as domestic firms resume production faster than global rivals and sell more Covid-19 related goods such as face masks.

However, some analysts said exports could come under pressure in coming months, as major European economies, including France, Germany and the United Kingdom, went back into lockdown as a second wave of coronavirus cases gathered strength.

Buffet’s Berkshire Hathaway ramps up its share buyback program

As the coronavirus pandemic weighs on its operating earnings and its stock price weakens, Berkshire Hathaway has ramped up its stock repurchasing program even more in the third quarter, nearly doubling the record buyback from the second quarter.

Warren Buffett’s conglomerate bought back US$9 billion of its own stock last quarter it was revealed yesterday in the company’s latest quarterly earnings report. That’s up significantly from the US$5.1 billion level during the second quarter and brings Berkshire’s total buybacks to US$15.7 billion for 2020.

Buffett’s repurchase spree comes amid a tough time for its operations as the global economy struggles to recover from the coronavirus, directly impacting the company’s wholly owned businesses which include railroads, utilities and insurance.

Berkshire said its operating earnings came in at US$5.478 billion, down more than 30 percent from the year-earlier period. But the company’s net earnings — which account for its big investments in the likes of Apple — skyrocketed more than 82 percent on a year-over-year basis to US$30.137 billion.

Apple, Berkshire’s biggest stock holding, rallied more than 26 percent in the third quarter. Coca-Cola, another of the company’s major holdings, gained 10.5 percent during the quarter.

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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