Morning Market Update - 10 May 2019

Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Thursday – CHINA – Consumer Price Index – Consumer prices rose 2.5% in the year to April, up from annual growth of 2.3% in March.
  • Thursday – US – Trade Balance – The trade deficit widened slightly, from US$49.3 billion in February to US$50.0 billion in March.
  • Friday – AUS – RBA Statement on Monetary Policy
  • Friday – UK – Gross Domestic Product

S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket recovered some of the previous session’s losses yesterday, to close 0.4% higher, led by strong gains in the Energy, Telecommunications and Utilities sectors. Consumer Staples, Health Care and Materials were the only sectors to close lower. 

Energy stocks were a standout performer, after global oil prices fell on Wednesday night on the back of a fall in US crude stockpiles. Santos gained 1.9%, Oil Search climbed 1.8% and Woodside Petroleum added 1.7%.

 The Telecommunications sector strengthened 2.1%, boosted by a 2.7% gain by Telstra in response to the ACCC’s decision to oppose the proposed merger between TPG Telecom and Vodafone Hutchison Australia.

The big four banks ended the session mostly positive, with only Westpac closing lower, while Materials heavyweights BHP and Rio Tinto, closed down 0.5% and 0.6% respectively.

The Australian futures market points to a 0.14% fall today, driven by broadly weaker markets overnight.

Overseas Markets

European sharemarkets fell on Thursday, as concern about a potential breakdown of US-China trade talks again weighed on investor confidence. Technology and bank stocks closed lower. The broad based STOXX Europe 600 and German DAX both slid 1.7%, while the UK FTSE 100 gave up 0.9%. 

US sharemarkets also closed lower overnight, as President Trump did little to remove uncertainty surrounding the ongoing US-China trade talks in his latest speech. Trump reinforced his decision to lift tariffs on Chinese goods this week, saying that China "broke the deal". However, he later acknowledged he received a "beautiful letter" from the Chinese leader and would probably speak to him by phone, again raising hopes a deal may be done. By the close of trade, the Dow Jones lost 0.5%, the S&P 500 slipped 0.3% and the NASDAQ weakened 0.4%.

CNIS Perspective

It went largely unnoticed on Tuesday, given all the attention was focussed on the RBA interest rate announcement, but retail sales data continues to paint a bleak picture. 

Retail spending remains in the doldrums, reflecting the headwinds from high household debt, weak growth in incomes and the downturn in the housing market.

Retail sales volumes have not recorded growth for six months and retail sales values only showed modest growth of 1.1% in the March quarter, which is the weakest pace of growth in 7 ½ years. 

The data also provides evidence the downturn in housing is biting, with household-goods retailing declining sharply in volume terms, and growing only slightly in value terms.

Department store sales also continued to contract, while consumers are still happy to pay for an experience, with spending on cafes, restaurants and takeaway food services performing better. 

Concerning for GDP data is the strong correlation between household consumption, a key input in the GDP measure, and the contraction in retail sales.

Retail Sales & Consumption 

Should you wish to discuss this or any other investment related matter, please contact your Investment Services Team on (02) 4928 8500.


The material contained in this publication is the nature of the general comment only, and neither purports, nor is intended to be advice on any particular matter. Persons should not act nor rely upon any information contained in or implied by this publication without seeking appropriate professional advice which relates specifically to his/her particular circumstances. Cutcher & Neale Investment Services Pty Limited expressly disclaim all and any liability to any person, whether a client of Cutcher & Neale Investment Services Pty Limited or not, who acts or fails to act as a consequence of reliance upon the whole or any part of this publication.

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Topics: CNIS, Dow Jones, Australian Market, ASX, international markets

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