INSIGHTS

Global sharemarkets were stronger last week. Although, some caution crept in as tensions between the US and China continued to rise, and US policymakers were unable to agree on the next round of COVID-19 stimulus. The strongest US sectors were industrials (+4.8%), financials (+3.3%) and energy (+3.1%), while real estate (+0.7%), healthcare (+0.9%) and utilities (+1.0%) were the weakest. The top NZX 50 movers last week were Sky TV (+7.8%), Contact Energy (+4.5%) and Goodman Property (+3.8%), while Sanford (-6.2%), Mainfreight (-4.4%) and Ryman Healthcare (-4.1%) lagged.

US President Donald Trump last week issued executive orders to address “the threat posed” by Chinese apps TikTok and WeChat (which are respectively owned by Chinese companies ByteDance and Tencent). US/China tensions have been rising for months as the world's two biggest economies continue to butt heads over numerous issues, including the origin of the virus as well as democracy in Hong Kong.

Markets have also been monitoring negotiations between Republican and Democratic leaders in the US, as both sides struggle to agree on the next economic relief package. A key sticking point appears to be the $600 a week unemployment benefit that expired at the end of July. Democrats want this extended at the same level, while Republicans are happy for an extension but at a reduced rate.

As the global reporting season winds down markets will be watching key economic events in the US this week. US retail sales for July will be of note and investors will keep an eye on Washington for signs of stimulus news. Democratic presidential nominee Joe Biden has also confirmed he will announce his running mate this week.

It’s also a very busy week on the local front. The highlight of the week will be the Reserve Bank of New Zealand (RBNZ) Monetary Policy Statement (MPS) and Official Cash Rate (OCR) review, which is out at 2:00pm on Wednesday. The OCR is likely to remain unchanged at 0.25%, so the focus will be on any changes to the Large Scale Asset Purchase (LSAP) programme. Economists had expected it to increase from the current $60bn level, although with markets stable and the economy performing better than expected, the RBNZ will probably sit tight for now.

Local investors will also be watching the flash ANZ Business Outlook survey. ANZ will release its preliminary Business Outlook survey for August on Tuesday at 1:00pm. The July survey saw business confidence and the own activity measure improve from June levels, although both remained well below long-term averages. Both indices were the strongest since February, although neither was as high as the July flash estimate had suggested, indicating that the economic rebound may have stalled during the second half of July.

The latest REINZ report. Late this week we should see the July housing report from the Real Estate Institute. Last month, national sales volumes continued to rebound, with the number of properties sold increasing 7.1% from the same month a year ago. The median days to sell increased by nine days to 55 in Auckland, and by three days to 42 elsewhere. We are yet to see any real evidence of COVID-19 impacting house prices.

The corporate reporting season also begins across Australia and New Zealand. As the global earnings season wraps up, attention (for local investors at least) will shift to the August reporting season across Australia and New Zealand. The next three weeks are expected to be extremely busy, and this week some of the domestic highlights will be earnings release from Contact Energy, NZX and Precinct Properties. In addition, Ryman Healthcare and ASX-listed Xero are holding annual meetings which could mean some trading updates. Across the Tasman, results will be forthcoming from Commonwealth Bank, Transurban, Goodman Group and Telstra.