Business & Investing: Oil could soon hit multi-year highs; Local stockmarket waits for today’s inflation figures
Oil continued its strong run for a sixth straight week with Brent Crude futures advancing a further 2.8 percent to US$84.90 a barrel.
Oil prices have now climbed more than 30 percent since late August as growing demand and tight supply show no signs of easing.
If oil pushes above its previous October 2018 high of US$86.71, it will be on track to hit prices last seen in 2014.
Stocks in the US enjoyed their best week in nearly three months after better than expected corporate earnings and a solid monthly retail sales report finally gave investors something to cheer about. In recent weeks global markets have been dogged by worries about surging energy prices, congested supply chains and companies failing to pass on higher costs to consumers keeping investors on edge.
The blue-chip S&P 500 rose 1.8 percent for the week, its best weekly performance since late-July, while last Thursday’s trading session in the US marked Wall Street’s best daily performance for eight months.
Industrial and financial stocks helped drive the gains, including strong results from investment banks JP Morgan and Goldman Sachs that were well ahead of expectations. The technology-heavy Nasdaq index, which has been under pressure in recent weeks, also finished the week 2.2 percent higher.
The strong rebound on Wall Street this past week failed to flow through to the NZ sharemarket with the NZX50 slipping 0.5 percent to 13,012.
It was the second losing week for the local market as a locked down Auckland, rising bond yields and higher interest rates continue to keep investors on edge, while today’s September quarter Consumer Price Index (CPI) will be closely watched for signs of inflation beginning to accelerate.
Locally, a2 Milk was the week’s best performer gaining 12.2 percent after a trading update from a smaller competitor reported an improvement to the all-important daigou channel (a network of informal product resellers that has been unable to operate during the pandemic) fuelling speculation a2 Milk’s results might surprise on the upside. Since hitting a low of $5.39 last month the shares have since rebounded more than 30 percent closing on Friday at $7.08.
Mainfreight shares experienced their biggest weekly fall since the onset of the pandemic induced sell-off in March last year ending the week down more than 6 percent to $87.25 as congested supply chains and slowing global growth have the potential to impact its trading outlook. The freight and logistics operator has been one of the year’s best performers with its shares up 25 percent year to date. The company will report its half year results next month.
My Food Bag shares hit a new low of $1.19 last week. In a trading update the meal-kit provider reported results that were in line with forecasts but said it had experienced higher costs in recent months due to a lift in ingredient prices and labour costs. Its shares are now down more than 35 percent since listing in March.
Across the Tasman, Australia’s ASX200 index ended the week up 0.6 percent at 7362.
It was a roller coaster week for gold with the precious metal briefly touching US$1800 an ounce before falling sharply on Friday. An upbeat US retail sales report added weight to monetary policy hawks who want to see Fed policy tightened sooner rather than later. Gold ended the week up 0.6 percent a US$1767 an ounce after being up as much as 2.4 percent earlier in the week.
The price of bitcoin surged for a third straight week climbing more than 12 percent to a high of $62,900 following confirmation that an exchange traded fund (ETF) is likely to be approved in the coming weeks fuelling further investment potential in the popular cryptocurrency.
The NZ dollar pushed back above 70 US cents for the first time in three weeks gaining 2.1 percent for the week to 70.75 US cents.
TOP 10 WEEK IN REVIEW
Z Energy’s board unanimously approved a $2 billion takeover offer from Australian based fuels retailer Ampol. While the $3.78 per share headline offer remains unchanged, Z Energy shareholders will be able to retain a $26 million, or 5 cents per share interim dividend payment. Z Energy’s board said that it recommended shareholders accept the offer, provided it is within or higher than the valuation range of independent adviser Calibre Partners, which is currently being prepared.
Comvita said its first-quarter operating earnings increased almost 11 percent, despite Covid-related shipping delays pushing some sales into October. The honey exporter said it still expects pre-tax earnings for the full year to be between $27 million and $30m compared with $25.5m for the year ended June. The company said $4m of goods scheduled for delivery in September were delayed into October because of shipping interruptions. Had those sales been included it said revenue would have been up 4.5 percent in the quarter. Comvita shares gained 3.8 percent last week to $3.79.
SkyCity Entertainment announced that Rob Campbell would retire as chair of the casino operator next January. The announcement comes after his appointment as chair of Health NZ, the body responsible for amalgamating the country’s 20 health boards. Campbell was appointed as a director of the NZX and ASX listed casino and hotel operator in June 2017 and has been its chair since January 2018.
Air New Zealand is set to receive a further five months of support for cargo flights worth $150 million under a government scheme to maintain air freight capacity while the borders remain closed. The Maintaining International Air Connectivity (MIAC) scheme subsidises air freight in the absence of passenger flights making it economical for airlines to continue providing freight services.
Rocket Lab has acquired Advanced Solutions (ASI), a Colorado-based aerospace engineering company for US$40 million (NZ$57.6m). Rocket Lab said ASI’s space software, mission simulation, test systems, and guidance, navigation and control solutions would “significantly strengthen” its space systems portfolio.
BNZ head of research Stephen Toplis said the government’s latest accounts show it has plenty of head room to provide further Covid-related support, if required, with $11.5 billion in cash available. The accounts revealed the deficit for the year ended June before asset gains and losses was $4.6b, well below forecasts and only a fifth of the previous year’s deficit. The residual cash deficit fell to just $13.8b compared with the May forecast of $25.3b. Toplis said that additionally, the accounts show that, as at June 30, $4.7b of the $50b covid recovery fund had not yet been spent. Combining the cash and the underspending and the funding available climbs to $16.2b according to Toplis.
Fonterra has lifted the performance of its foodservice business earning more than $3 billion in annual revenue for the first time. The dairy giant has long sought to improve the performance of its added value product offerings having switched its focus to making the most out of New Zealand milk. The co-op said it is planning to spend $1b in capital expenditure by 2030, with foodservice taking a significant portion of that. It said the aim is for food services to produce $5b in annual revenue by 2030. Chief executive Miles Hurrell said foodservice is a high-value channel and a key part of its long-term strategy.
The Financial Markets Authority has censured Jarden Securities after OM Financial, which it owns, was found to have mixed investor money with its own in a trust account. OMF is specialist derivatives broking house which trades financial instruments covering foreign exchange, equities, and futures markets. Jarden acquired the business in 2019 including the derivative issuer licence under which the breaches occurred. The FMA said OM Financial made 150 transfers – totalling US$1 million – of its own money into a trust account for holding investor’s money, to make business-related payments to third party providers.
Arvida announced it will acquire the Arena Living portfolio of six retirement villages and will raise $330m of new equity to help pay for it. The acquisition will expand its existing portfolio by nearly a quarter. The purchase price of $345 million estimated transaction costs of $8m and estimated work-in-progress adjustments of $10m. The villages are located in Auckland and Tauranga.
My Food Bag said it generated sales of $98.4 million in the six months ended September 30, from a total of 808,000 deliveries, which was in line with expectations. Total active customers increased 3.3 percent, while high value customers, those who have purchased at least 20 deliveries, increased at a similar rate. The company said the impact of the latest lockdown, which began mid-August, is yet to be quantified, but noted that it was experiencing higher ingredient and labour costs which had necessitated some price increases. Its shares hit a new low last week of $1.19.
COMING UP THIS WEEK
- Consumer Price Index (Sept Qtr) – Stats NZ
- Vehicle Registrations (Sept) – Stats NZ
- EBOS AGM
- Fletcher Building AGM
- Vital Ltd AGM
- Rua Bioscience AGM
- Comvita AGM
- Tourism Holdings (THL) AGM
- Auckland International Airport AGM
- Credit Card Spending (Sept) – RBNZ