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Morning Market Update - 12 February 2019

Pre-Open Data

International Market vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Monday – UK – Gross Domestic Product slowed to 0.2% in the December quarter, while the annual pace edged down from 1.5% in the September quarter, to 1.3% in the December quarter. Uncertainty over Brexit weighed on business investment.
  • Monday – UK – Industrial Production contracted 0.5% in December compared to the previous month. The decline is primarily attributed to a 0.7% fall in manufacturing.
  • Tuesday – AUS – NAB Business Confidence

S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket slipped 0.2% yesterday, as the big four banks weighed on the local index. However, despite the fall, the ASX 200 remains above 6,000 points and near four month highs. 

The Materials sector was the strongest performer, as mining stocks continue to benefit from a continued lift in iron ore prices, which rose 4.1% on Friday. The metal has now jumped ~18% in the past fortnight, following a mining accident in Brazil, which is now responsible for close to 160 deaths. BHP ended the session 2.0% higher, Rio Tinto gained 1.8% and Fortescue Metals rose 3.5%. 

JB Hi-Fi rose 1.5% after announcing a solid first half year result. Net profit rose 5.5% to $160.1 million, while total sales of $3.8 billion beat expectations. Online sales rose 21%, however, the company warned same stores sales growth had slowed in January as the trading environment has become more challenging. 

The reporting season continues this week, with Transurban (Tuesday), Aveo, CSL (Wednesday), AMP, Newcrest Mining, Telstra, Woodside Petroleum (Thursday) Baby Bunting and Medibank (Friday) among those companies due to release their earnings.   

The Australian futures market points to a 0.4% rise today, being driven by mostly stronger markets overnight.

Overseas Market 

European sharemarkets rose on Monday. Italian banks drove the FTSE MIB 1.2% higher, after data showed their capital ratios met European Central Bank standards. The broad based STOXX Europe 600 rose 0.9%, the German DAX climbed 1.0% and the UK FTSE 100 added 0.8%. 

US sharemarkets were mixed on Monday, weighed down by weakness among Communication Services and Health Care names. Trading was subdued as investors continued to remain cautious ahead of this week’s resumption of US-China trade talks, along with the prospect of another US Government shutdown on Friday. By the close of trade, the S&P 500 and NASDAQ had both eked out a 0.1% gain, however, the Dow Jones slipped 0.2%.

CNIS Perspective

It’s been one of the few bright lights of the Australian economy for some time, but if the fall in job ads follows previous trends, the unemployment rate could also start to climb. 

As the graph below illustrates, falling job ads have preceded rising unemployment in previous cycles.

Given the broad range of data already reflecting a weak Australian economy and the fact the job market is a lagging indicator, a more serious slowdown may already be upon us.

Job ads are dropping, which has signaled peak jobs growth before

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


Disclaimer

The material contained in this publication is in the nature of general comment only, and neither purports, nor is intended to be advice on any particular matter.  Persons should not act or 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. Cutcher & Neale Investment Services Pty Limited ABN 38 107 536 783 is a Corporate Authorised Representative of Cutcher & Neale Financial Services Pty Ltd ABN 22 160 682 879 AFSL 433814

 

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

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