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Key Points

  • The Australian sharemarket is poised to open higher this morning.
  • US and UK markets were closed overnight for public holidays.

Air NZ expects underlying loss in FY20; $NZ694m of charges

Robert Guy

Air New Zealand has warned of a full year underlying loss and a hit of up to $NZ694 million from significant items.

The airline says it enjoyed a “solid start” to the financial year but conditions deteriorated “dramatically” in early March due to COVID-19, which means it is now expecting an underlying loss for the 2020 financial year.

Australia

Air New Zealand is expected to report a loss. AP

Cost reduction initiatives means Air NZ expects to reduce its average monthly cash outflows by approximately $NZ50 million and $NZ60 million in the 2021 financial year.

The company also outlined a number of significant items that will be recorded in the 2020 full year results.

There will be a $NZ85 million to $NZ105 million de-designation of hedges, a $NZ350 million to $NZ450 million aircraft impairment charge and $NZ140 million to $NZ160 million of reorganisation costs.

There will be a $NZ21 million gain on sale from airport slots.

Air New Zealand’s Australian-listed shares last traded at $1.22, up from a low of 82c on April 8.

Aussie dollar could hit stumbling block on US-China tensions

William McInnes

The Australian dollar could hit a stumbling block later in the week if US-China tensions boil over, threatening its strong recovery in the last two months.

The Aussie rose modestly overnight, rising to US65.41¢ as it continues its gradual fight back from its COVID-induced March slump.

Australia China

The Australian dollar is close to recovering its losses from COVID-19. Dominic Lorrimer

“Oil prices, and by extension gas prices, continue to recover, supporting Australian dollar,” said CBA currency strategist Joseph Capurso.

“We expect AUD/USD to ease this week if Australia‑China or US‑China tensions continue to ratchet higher.”

The Australian dollar remains just 1.6 per cent shy of its pre-COVID-19 levels.

Prime Minister Scott Morrison is set to speak at the National Press Club today at 12:30pm where he is expected to outline plans to get the economy “out of ICU”.

European shares bolstered by rebound in German data

Timothy Moore

European shares rose in thin trade as a closely watched indicator of German business sentiment rebounded in May, with a slew of positive corporate updates boosting sentiment.

Also bolstering sentiment was confirmation of a $15 billion rescue of Lufthansa. The carrier has been locked in talks with Berlin for weeks over aid it needs to survive an expected protracted travel slump, with the airline wrangling over how much control to yield in return for financial support.

Berlin

German business morale rebounded in May. Bloomberg

Germany’s DAX surged 2.9 per cent to its highest level since March 6, recovering nearly 38 per cent from this year’s low.

The euro zone stock index rose 2.1 per cent, while the pan-European STOXX 600 gained 1.5 per cent.

A survey by the Ifo Institute showed German business morale rebounded in May after a dramatic fall the previous month, with activity gradually returning to normal after weeks of coronavirus-induced curbs.

The Ifo business climate index rose to a better-than-expected 79.5 from a downwardly revised 74.2 in April.

Read Timothy Moore’s Before the Bell here.

Gold dips slightly; Oil prices rise

Here are the overnight market highlights:

  • AUD +0.1% to 65.45 US cents
  • US markets closed for a holiday
  • In Europe: Stoxx 50 +2.3% CAC +2.2% DAX +2.9%
  • UK markets closed for a holiday
  • Spot gold -0.3% to $US1729.18 an ounce at 2.38pm New York time
  • Brent crude +1.1% to $US35.53 a barrel
  • US oil +1.4% to $US33.72 a barrel
  • Dalian iron ore -1% to 712.5 yuan
  • LME closed for a bank holiday
  • 2-year yield: US 0.17% Australia 0.25%
  • 5-year yield: US 0.33% Australia 0.38%
  • 10-year yield: US 0.66% Australia 0.85% Germany -0.50%

Good morning

Good morning and welcome to Markets Live for Tuesday.

This blog is not intended as investment advice.

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