Morning Market Update - 14 August 2019

Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Tuesday – AUS – NAB Business Confidence and Conditions – Business Confidence improved from 2 in June to 4 in July, while Conditions weakened to 2 in July from 4.
  • Tuesday – US – Consumer Price Index was in line with expectations, up 0.3% for July.
  • Wednesday – AUS – Wage Price Index
  • Wednesday – EUR – Gross Domestic Product
S&P ASX 200 Last 12 Months

Australian Market

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.

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%.

CNIS Perspective

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.

US Benchmark 30 Year Bond Rate (Monthly)

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


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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