Morning Market Update - 13 August 2020


Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Wednesday – AUS – Westpac Consumer Confidence fell 9.5% to 79.5 in August, approaching the low recorded in April during the nationwide lockdown. The sharp drop in confidence was led by NSW and Victoria.
  • Wednesday – US – Consumer Price Index rose 0.6% in June above an expected 0.3% rise.
  • Wednesday – UK – Gross Domestic Product shrank 20.4% in the June quarter, a significantly larger fall than other economies, which reflects the timing and duration of the UK’s lockdowns.
  • Thursday – AUS – Unemployment Rate
S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket fell 0.1% yesterday, in a mixed session of trade. The Financials sector was amongst the strongest performers, as ANZ, Westpac and NAB all rose between 1.9% and 2.3%. Commonwealth Bank fell 0.5% after the company released its FY20 results, which saw an 11.3% fall in cash profit to $7.3 billion due to ~$2.5 billion in loan impairments. The bank also announced they will pay a $0.98 per share dividend, down from the $2.31 paid out earlier this year.

Online job recruiter, Seek, slumped 8.6% after the company reported full year loss of $111.7 million, due to a significant decline in job ads on its website, the company also confirmed it will not pay a dividend.

The Materials and Information Technology sectors were the weakest performers. A sell-off in the price of gold from recent highs dragged goldminers lower, while a drop in iron ore prices caused mining heavyweights Rio Tinto and Fortescue Metals to both lose 1.4%. WiseTech Global fell 8.4% after receiving broker downgrades to drag the Information Technology sector lower.

The Australian futures market points to a 0.69% rise today, driven by stronger overseas markets.

Overseas Markets

European sharemarkets rose for the fourth straight day on Wednesday, with the broad based STOXX Europe 600 up 1.1%, despite rising coronavirus number from France, Spain and the UK. HelloFresh underperformed, down 5.5% as investors took profits, despite the company announcing record active customers on Tuesday, which nearly doubled from a year ago.

US sharemarkets closed higher overnight, with the Information Technology sector the strongest performer. Graphics designer Nvidia lifted 5.4%, Apple and Microsoft gained 3.3% and 2.9% respectively, while Alphabet added 1.8% and Facebook rose 1.5%. E-commerce giants Alibaba and Amazon also traded higher, both up 1.7%.

By the close of trade, the Dow Jones rose 1.1%, the S&P 500 added 1.4% and the NASDAQ lifted 2.1%.

CNIS Perspective

The British economy sunk into its deepest recession on record in the second quarter, shrinking back to the size it was in 2003. Statistics released overnight showed GDP dropped 20.4% in the second quarter, compared with the first.

While some data suggest a modest improvement began in June, the Bank of England doesn’t expect the economy to fully recover until the end of 2021.

The second quarter decline was twice as deep as what was experienced in the US. Since the end of 2019  Britain has suffered the worst performance of any big European economy, with the exception of Spain.

Lockdowns in Britain started later than in neighbouring countries and was not eased until mid-June. The restrictions also affected a greater share of its population, for a longer period of time, especially when compared to the state-by-state shutdowns imposed in the US.

Despite the tremendously negative headline, markets continue to ‘look through’ the appalling economic data, with the UK benchmark FTSE100 gaining 2% yesterday.

Decline in GDP in the second quarter of 2020 compared with the previous quarter

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 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.

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, Australian Market, ASX, international markets

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