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Morning Market Update - 13 September 2019


Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Thursday – US – Consumer Price Index – Core consumer prices rose 0.3% in August, with underlying inflation now 2.4% higher in year-on-year terms, above the Federal Reserve’s 2% inflation target.
  • Friday – EUR – Trade Balance
  • Friday – US – Retail Sales

S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket posted a modest gain yesterday, ending the session 0.3% higher, despite giving up most of its earlier improvements as the day wore on. REITs was the best performing sector, while Utilities and Telecommunications also recorded solid improvements.

The big four banks all posted gains between 0.2% and 0.9% to lead Financials higher, while mining heavyweights BHP and Rio Tinto added 0.1% and 0.6% respectively, boosting the Materials sector.

Energy stocks weakened in response to lower crude oil prices, following reports President Trump has considered easing sanctions on Iran. Woodside Petroleum lost 2.1%, Santos fell 0.9% and Oil Search gave up 0.8%.

Wesfarmers (WES) received Federal Court approval for its proposed $776 million takeover of lithium miner Kidman Resources, which is due to be delisted from the ASX today. WES ended the session 0.6% lower.

The Australian futures market points to a 0.33% rise today, driven by broadly stronger markets overnight.

Overseas Markets

European sharemarkets firmed on Thursday. The German DAX strengthened 0.4%, the broad based STOXX Europe 600 climbed 0.2% and the UK FTSE 100 rose 0.1%.

US sharemarkets also closed higher on Thursday, led by strength in the Materials sector. Signs emerged of a de-escalation in US-China trade tensions, as both nations undertook actions perceived as goodwill towards the other. President Trump tweeted the US would delay increasing tariffs to 30%, from 25%, on US$250B of Chinese imports from 1 October to 15 October. Separately, Reuters reported China had made the biggest purchase of US soybeans since June. By the close of trade, the Dow Jones had gained 0.2%, while the S&P 500 and NASDAQ both added 0.3%.

CNIS Perspective

Overnight, expectations the European Central Bank (ECB) would provide easing measures have been met. ECB president Mario Draghi said the eurozone faced “more protracted weakness” than previously thought, encouraging governments of the need to act quickly to revive growth by way of tax cuts.

The ECB cut interest rates further into negative territory by 10 basis points to -0.50%, a record low. It has also revived its contentious open-ended quantitative easing (QE) programme of purchasing bonds at €20bn a month starting in November, until inflation expectations come close to 2%, at which point interest rates could start rising again.   

However, the ECB is facing resistance from France, Germany and the Netherlands, who suggest lower interest rates are doing more to fuel a real estate bubble and erode pensions, rather than reboot the economy.

With what some call the greatest monetary experiment of all time, negative interest rates and QE are leading to the distortion of asset prices. Given Draghi has limited tools at his disposal, the responsibility now falls on the 19 member countries to implement better fiscal policy and other home-grown measures.

Euro Area Interest Rate - Last 10 Years    

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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