Key Data for the Week
Key economic data released this week:
The Australian sharemarket fell 0.33% yesterday, with the Health Care sector the worst performer. Cochlear fell 3.4% and CSL lost 1.5%.
The Consumer Discretionary sector also had large losses, despite JB Hi-Fi gaining 0.8%, to continue from its strong gains on Monday.
The big four banks led the Financials sector lower; Westpac slipped 0.2%, NAB lost 0.3%, while Commonwealth Bank and ANZ both fell 0.6%. Investment management company, Challenger, rose 2.5% after reporting NPAT of $396m, however warned of challenging operating conditions for FY20.
The Information Technology and Materials sector both outperformed the market; Xero and Link Administration added 0.6% and 0.8% respectively. Miners Rio Tinto and Fortescue Metals rose 0.6% and 3.6% respectively, while BHP closed flat.
The Australian futures market points to a 0.73% rise today, being driven by stronger overseas markets.
European sharemarkets rose on Tuesday. Lloyds Bank and Deutsche Bank rose 0.5% and 1.3% to trace back some of Monday’s losses. By the close of trade, the broad based STOXX Europe 600 rose 0.5%, France’s CAC 40 rose 1.0% and Italy’s FTSE MIB gained 1.4%.
US sharemarkets rose sharply overnight, after US President Trump announced delays in imposing new tariffs on Chinese goods until December. All sectors posted gains, with Information Technology and Consumer Discretionary the strongest performers. Apple led the gains, up 4.2%, Amazon rose 2.2%, Microsoft added 2.1% and Alphabet gained 1.9%.
An inverted yield curve, where long dated interest rates are lower than short dated, has been a key recession indicator for some time and is one of a host of indicators closely monitored to measure economic conditions.
Over the past few years the US yield curve has been flattening, and is slightly inverted between 2 - 5 years. However, importantly, the more reliable period of between 2 - 10 years, the yield curve remains slightly positive.
The 10 year rate is just 0.05% higher than the 2 year rate, which is its flattest since 2007.
Interestingly, the rate on 30 year bonds is fast closing in on its record low of 2.0882% from July 2016.
While the US Federal Reserve and other central banks around the world are lowering their short term benchmark rates to stimulate economic growth, on the other hand, the falling longer dated rates are being driven by financial markets and global uncertainty, as money shifts to the less uncertain longer term bond yields.
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