Morning Market Update - 13 May 2020


Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Tuesday – AUS – NAB Business Confidence & Conditions – Confidence improved from a record low in March, lifting from -66 to -46 in April. The conditions index fell from -22 in March to -34 in April. Both confidence and conditions are indicating a very deep contraction in economic activity. 
  • Tuesday – US – Consumer Price Index fell 0.8% in April, to post the largest drop since 2008.
  • Wednesday – AUS – Westpac Consumer Confidence
  • Wednesday – UK – Gross Domestic Product

    S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket fell 1.1% yesterday, with all but two sectors closing lower. The Energy sector was the weakest performer following lower oil prices on Monday night; Oil Search fell 4.5%, Santos slipped 3.2% and Woodside Petroleum lost 1.3%.

The Financials sector also underperformed, with the big four banks all down; NAB was the weakest, down 2.9%, Westpac lost 2.6%, ANZ fell 2.0% and Commonwealth Bank slipped 0.7%. Macquarie Group was harder hit, down 4.1% after Monday’s 6.0% rise.

The Health Care sector bucked the trend to close higher. CSL and ResMed rose 1.8% and 5.2% respectively, while Sonic Healthcare added 0.3% and Ramsay Health Care gained 0.5%.

The Australian futures market points to a 1.28% fall today, driven by weaker overseas markets.

Overseas Markets

European sharemarkets closed mostly higher on Tuesday. Defensive stocks were amongst the strongest performers, as investors weighed up risks against countries starting to lift lockdown restrictions. Tesco and Nestlé gained 3.6% and 0.6% respectively. Vodafone surged 8.7%, to help boost the Telecommunications sector, after the company announced it will maintain its dividend and provided FY earnings forecast.

US sharemarkets closed lower overnight after US infectious disease expert Dr Anthony Fauci warned US Congress that a premature reopening of the US economy could lead to further coronavirus outbreaks. All sectors were weaker and all except two closed over 1% lower. Information Technology stocks Apple, Facebook, Alphabet, Amazon and Microsoft all closed between 1.1% and 2.3% lower.

By the close of trade, the Dow Jones fell 1.9%, while the S&P 500 and NASDAQ both lost 2.1%.

CNIS Perspective

The coronavirus pandemic has drastically altered the outlook for the world economy. However, it is arguably going to hurt Italy’s already fragile economy more than most.

According to the most recent European Commission statement, the eurozone is expected to contract by a record 7.4% this year, much more than in 2009, where the contraction was around 4.5%.

Economic activity in Greece, Spain, Croatia and Italy is forecast to contract the most. Italy was struck first, and most forcefully by COVID-19, with its economy expected to contract by about 9.5% and is forecast to take longer than most other member states to recover.

With the country already struggling economically prior to COVID-19, Italy presents a real concern for the European Union. Already overwhelmed by an ageing population, second only to Japan, with a percentage of population over age 65 standing at 23%, its banks burdened with bad debts, and government debt to GDP standing at 135% is now projected to soar to a default prone 180%.

It is a long simmering eurozone predicament, which has now been accelerated due to the virus-driven recession. If Italy, the eurozone's third-largest economy were to require a bailout, with debt approximately 20 times larger than that of Greece when it was bailed out in 2012, it’s going to be major headache for the Union to overcome.

Italy is an important part of the eurozone economy

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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