Jarden Brief: Oil rises to highest level since 2018

Oil prices continue to rise. Photo / Getty Images

Keeping you up to date with the latest market moves, in association with Investment firm Jarden

New Zealand

New Zealand markets traded higher on Monday, with the S&P/NZX 50 lifting 0.4 per cent to 13,337.3 points.

Markets were given a boost later in the day as the government announced a phased plan to ease Auckland's lockdown restrictions.

Financials and consumer cyclicals led the way with strong performances - the sectors made gains of 2.1 and 1.4 per cent, respectively.

Sky TV finished as the day's best performer up 3.1 per cent at the close. Stocks that would benefit from Covid-19 reopening rounded out the best performers. Caravan rental company Tourism Holdings and national airline Air New Zealand both finished higher by 3.0 and 2.7 per cent, respectively. Air New Zealand investors may also be pleased to hear that the Government will be extending its financial support for international aviation, a programme which was due to finish at the end of this month. The support facility will now allocate roughly $195 million to support flights over the next five months.

Healthcare (unchanged) and energy (down 0.3 per cent) were the only sectors not to make gains.

Biomedical company Pacific Edge (down 2.7 per cent), agricultural company Scales Corporation (down 1.5 per cent), and Oceania Healthcare (down 1.3 per cent) were the day's three worst performers.

The Reserve Bank of New Zealand interest rate decision will be a key event for markets this week. Market yields are currently pricing in 100 per cent certainty of a 25 basis point hike, with the Bank implying that they do not view ongoing lockdowns as a reason not to hike rates.

In other news, New Zealand involved M&A deals have reached record levels of activity with over US$14bn of deal activity being recorded in the previous year to date, almost three times as much as the same period last year. The outbreak of Covid-19 meant many deals were put on ice when the country went into level four lockdown in early 2020, coming to fruition later in the year. This, in combination with increased market volatility, caused a perfect storm for deal activity where 127 transactions (public and private) were recorded.

International                                                                                         
US

The US market started the week off with a sell-off across all of the three major indices.

The S&P 500 decreased 1.5 per cent, the Dow Jones Industrial Average (DJIA) declined 1.1 per cent, and the NASDAQ dropped 2.4 per cent.

There were only two sectors in the green this morning, namely energy (+2.2 per cent) and utilities (+0.9 per cent). All other sectors underperformed, with technology (-2.6 per cent) and communication services (-2.5 per cent) decreasing the most.

The best performers on the S&P 500 this morning were all oil exploration companies, benefitting from the rising oil price. Devon Energy booked the biggest gains, increasing 6.3 per cent, followed by Diamondback Energy, up 5.4 per cent, and Marathon Oil, rising 5.0 per cent. All three stocks hit 52-week highs.

Energy technology company Enphase Energy (-6.7 per cent) was the worst performer at the time of writing, followed by Twitter (-6.7 per cent).

Rounding out the bottom performers was Facebook, dropping 5.6 per cent. The social media giant is facing scrutiny after whistleblower Frances Haugen alleged the company has been prioritising profits over safety. The former Facebook employee will testify on Tuesday. These claims come alongside leaked documents including a series of research slides, conducted by Facebook, which showed Instagram was damaging the mental health and wellbeing of some teenage users. Additionally, multiple global news publications reported Facebook, Instagram and WhatsApp had gone down for users this morning.

Economic data from the US this week include PMI and trade balance data, to be reported later tonight, initial jobless claims on Thursday, and nonfarm payroll numbers for the month of September which will be released on Friday. The Fed will be looking closely at the jobs report to determine if it supports its plans to begin tapering the monthly bond purchasing in November.

Rest of the world

The Hang Seng declined 2.2 per cent over night, after there was a trading halt triggered for the Chinese developer Evergrande. The company missed another bond payment last week of US$46 million, and Chinese media have reported that it will be selling a majority stake in its property management business for more than US$5 billion.

Markets in mainland China will be closed until the 7 October for Golden Week, followed by the country releasing its Caixin PMI data on Friday.

The Nikkei decreased a further 1.1 per cent after a big sell off at the end of last week.
Japan will report the Tokyo consumer price index later today, while Europe will release its PMI data over night.

Commodities

Commodities were performing well this morning.

Gold increased by 0.5 per cent to US$1,767.50 per ounce.

Oil has rallied to its highest levels since 2018, increasing a further 3.0 per cent to US$78.20 per barrel. The members of the OPEC+ group agreed to maintain their plan to gradually increase monthly production, despite being pressured by various countries to increase that supply as demand is rising.

Cryptocurrencies were in the red, with Bitcoin decreasing 0.3 per cent after a good recovery on Friday, and Ethereum down 3.0 per cent.

The US 10-year treasury rate was trading lower compared to last week, yielding 1.481 per cent, at the time of writing.

Australia

The ASX 200 rebounded 1.3 per cent yesterday, supported by strong performances from travel-related stocks and Commonwealth Bank.

Flight Centre Travel Group rose 9.6 per cent to a 19-month high with the recent announcement that Australia will reopen international borders from November, while Webjet (+2.9 per cent) and Corporate Travel Management (+3.3 per cent) also performed well.

The academic and education services sector (up 8.6 per cent) was the best performing sector of the day, carried by IDP Education, which rose by 8.6 per cent to close just shy of its all-time high.
 
Financials (up 2.5 per cent) was the main sector that contributed to index gains however, with a 5.1 per cent rise in ASB-owner Commonwealth Bank due to its on-market share buyback. Westpac (+2.1 per cent), ANZ (+2.2 per cent), and NAB (+1.9 per cent) followed Commonwealth Bank up.

Mining stocks were beneficiaries of a weakening US dollar and high metal prices globally. Alumina gained 6.2 per cent, while Ramelius Resources adding 2.6 per cent.

The only sector to decline was healthcare, which fell 0.6 per cent. Sealink Travel Group was the worst performer, down 5.4 per cent. The Australia-based tourism and transport company fell despite the announcement of the upcoming international border reopening.

Despite an overall gain for the consumer cyclicals sector, Kogan fell 3.2 per cent while online marketplace Redbubble continued to drop by another 4.1 per cent.

• For more information on the latest market moves, get in touch with Jarden.

Disclaimer: This Morning Brief has been prepared in good faith and reflects opinions and views at the time of publication, using external sources, systems and other data and information we believe to be accurate, complete and reliable at the time of preparation. We make no representation or warranty as to the accuracy, correctness and completeness of that information, and will not be liable or responsible for any error or omission. This Morning Brief is not to be relied upon as a basis for making any investment decision. Please seek specific investment advice before making any investment decision. Jarden Securities Limited is an NZX Firm, a broker disclosure statement is available free of charge at www.jarden.co.nz. Jarden is not a registered bank in New Zealand. Full disclaimer available at: https://www.jarden.co.nz/limitations-and-disclaimera>