Business & Investing: Fear levels are down and optimism up in the US markets, Plus: Kiwi cancer diagnostic company Pacific Edge boosted by approval from US insurer

The US sharemarket continued to push into record territory last week as investors largely ignored concerns about the markets’ elevated levels following reassurances from the Federal Reserve that monetary policy would remain accommodative. The S&P closed up 2.7 percent for the week to end at 4,129, its best week since early February.

Even the VIX, sometimes referred to as the fear gauge, closed last week at a one-year low of 16.7, falling below the level it was at before the onset of the Covid pandemic in mid-February last year.

The NZX50 gained 0.7 percent for the week to end at 12,574, while in Australia the ASX200 closed up 2.5 percent at 6,995.

On commodity markets Brent crude oil futures slipped 2.6 percent to US$62.98 a barrel and gold rallied, closing at $1746 an ounce, a two-month high and up 1.1 percent for the week.

The kiwi dollar was unchanged at 70.3 US cents, Bitcoin gained a further 2.7 percent to US$59,700 after trading as high at $61,000 last week and the closely watched 10-year US Treasury yield fell 0.4 percent to 1.67.

Pacific Edge shares climb 20 percent after securing a second major US insurer

Shares in cancer diagnostic company Pacific Edge spiked higher on Friday following confirmation of a a deal with a large US insurer. It’s the second major client Pacific Edge has secured in recent months.

The company’s shares jumped more than 20 percent to $1.20 after announcing its Cxbladder test had been approved by United Healthcare, America’s biggest healthcare group.

The insurer has over 50m members and a 14 percent share of the nation’s health insurance, meaning more than 110 million Americans will be covered to use the Cxbladder test via their insurance policies.

Pacific Edge CEO David Darling said securing the approval of one of America’s largest insurers was a significant milestone for the company.

“This positive coverage decision reflects the validation that comes from independent published clinical evidence, inclusion in guidelines and coverage with other providers such as the CMS. It adds further validation of Cxbladder and a point of inflexion for other healthcare insurers.”

Air New Zealand delays its planned capital raising until September

Air New Zealand has postponed its much anticipated capital raising by up to three months as the airline waits for greater clarity regarding the progress of the Covid-19 pandemic, the vaccination rollout and the opening of the trans-Tasman bubble.

“In light of these evolving circumstances, the crown and the company have agreed it would be appropriate to defer the equity capital raise to allow time to assess these evolving circumstances further,” the airline’s chair, Dame Therese Walsh said in a statement to the NZX.

As a result, the government’s $900 million credit facility extended to the airline will increase by $600m to $1.5 billion and will run for an additional 16 months, through to September 2023.

The company confirmed that to date it has only drawn down $350m of the facility, with no further drawings since February.

The terms of the facility have also been substantially amended. The facility will continue to be provided in two tranches, a first tranche of $1b with a reduced margin of 2.5-5 percent per annum and a second tranche of $500m with a reduced margin of 4-5 percent per annum, plus a base rate calculated by reference to the bank bill benchmark rate.

Walsh confirmed that the government remains committed to being a majority shareholder in the national carrier after the equity raising and that funds drawn under the Covid loan facility will be repaid from the proceeds.

Finance Minister Grant Robertson also confirmed he had written to the airline outlining a series of government expectations, particularly in regard to the airline ensuring that fares remained affordable and that regional centres would continue to be serviced appropriately.Air NZ shares closed up 1.1 percent at $1.83.

NZX confirms dairy derivatives trading will move to the Singapore Exchange (SGX) later this year

The NZX has confirmed that it will shift the listing and trading of NZX’s dairy derivatives contracts to the Singapore Exchange (SGX), citing the opportunity to expand the market as the main reason for the shift – saying it would “unlock and accelerate the growth potential of NZX’s dairy derivatives”.

The move is subject to regulatory controls and will take effect in the second half of this year.

The decision follows the signing of a heads of agreement in October last year between the two exchanges.

NZX’s latest metrics showed the number of futures lots traded in March fell 41 percent to 21,510 from March last year while options lots traded fell 8 percent to 6,818.

NZX chief executive Mark Peterson said NZX would continue to provide dairy product development expertise, market research and product support and will continue to lead engagements with the dairy industry.

“We see huge opportunity through this partnership to unlock potential and propel the future growth of our dairy derivatives suite. By working together, we can leverage SGX’s global market connectivity, strong Asian presence and international distribution to scale growth and liquidity.”

Singapore Exchange CEO Loh Boon Chye said Asia represented the world’s largest bloc of dairy consumers and producers.

NZX shares closed on Friday down 0.5 percent at $2.08.

Amazon to remain union free after crucial company vote strongly opposes union membership

Online retail giant Amazon has decisively defeated a landmark union drive that would have established the company’s first US union, though labour advocates are hopeful the high-profile fight will nonetheless be successful in spurring support for broader change.

In the final vote tally, 1,798 workers at the Bessemer, Alabama, warehouse voted against unionisation while 738 voted in favour of the proposal.

It was a significant setback for organised labour groups, though the union behind the drive said that it intended to file objections and unfair labour practice charges with the labour board. It also said  Amazon had “taken advantage of a broken system, one that is stacked in the favour of employers.”

The company was criticised by union groups for launching an anti-union website that warned against paying dues, despite the fact Alabama is a right-to-work state, so workers who didn’t support the union would not have been required to join the union or pay union dues. The company also sent numerous text messages to workers pushing a “no” vote.

Amazon defended its approach, saying it had “provided education that helped employees understand the facts of joining a union.”

Record fine imposed on China’s Alibaba Group after accusations of monopolistic behaviour

Things continue to go from bad to worse for China’s high profile online retailer Alibaba after being fined a record 18.2 billion yuan (NZ$4 billion) following a finding by China’s antitrust regulators that the online shopping giant had been behaving like a monopoly.

Chinese state media reported on Saturday that the State Administration for Market Regulation had imposed the penalty following an antitrust investigation into Alibaba’s “exclusive dealing agreements” that prevented merchants from selling products on rival e-commerce platforms — a practice known as “choosing one from two.”

The fine is equivalent to 4 percent of Alibaba’s sales in China in 2019 according to media reports and dwarfs the previous record penalty of $975 million handed out to American chipmaker Qualcomm in 2015.

Beijing has been applying significant regulatory pressure to China’s national tech champions, part of a crackdown that President Xi Jinping has described as “one of the country’s top priorities for 2021.”

Last month, Xi urged officials to step up their efforts to regulate online companies to maintain social stability after fears the companies had been gaining too much power and influence in China’s tightly controlled political environment.

Co-founded by legendary entrepreneur Jack Ma, Alibaba is one of China’s most prominent and successful private businesses. However, Ma has recently become ‘persona non-grata’ with China’s political elite and has rarely been seen in public since October following a very public rebuke and the government’s cancellation of the impending IPO of his online payments company Ant Group.

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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