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Morning Market Update - 14 May 2019


Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Monday – AUS – Home Loans for owner-occupier homes (excluding refinancing) fell 2.8% for March. Loans for investor housing declined 2.7%.
  • Tuesday – AUS – NAB Business Conditions & Confidence
  • Tuesday – EUR – Industrial Production
  • Tuesday – UK – Unemployment Rate

S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket fell 0.2% yesterday, weighed down by heavy losses in the Financials sector. ANZ and Macquarie Group both went ex-dividend and lost 3.9% and 3.5% respectively. Commonwealth Bank lost 2.5%, after reporting a 9% fall in cash earnings from the previous quarter. The company also reported it has set aside $714 million for customer remediation. 

The Utilities sector also lost ground. AGL Energy slipped 1.7%, after having broker downgrades which cited FY20 headwinds from lower electricity prices and higher input fuel costs for thermal generation. 

Lendlease Group surged 8.7% after media reports a Japanese suitor is working on a potential takeover bid, however the company said it has received no approach. 

The Australian futures market points to a 0.86% fall today, being driven by weaker international markets. 

Overseas Markets

European sharemarkets fell on Monday in response to an escalation of the US-China trade war. Germany’s DAX lost 1.5%, the broad based STOXX Europe 600 fell 1.2% and the UK FTSE 100 lost 0.6%. 

US sharemarkets also closed lower overnight, due to the ongoing trade concerns. The Dow Jones and S&P 500 both fell 2.4%, while the NASDAQ slipped 3.4%. Apple lost 5.8% and shares in Boeing fell 4.9%, while newly listed Uber Technologies dropped a further 10.75%. 

CNIS Perspective

Yesterday’s domestic Housing Finance data showed a 2.8% fall in owner-occupied home lending (ex – refinancing) for March, the fourth drop in five months. February’s rise proved a ‘dead cat bounce’, highlighting the need to focus on the longer term trend, rather than monthly data, which can be misleading. 

All States and Territories recorded annual weakness, led by NSW -17.6%, Queensland -14.1% and Victoria -13.6%. Loans for the purchase of new dwellings were down 33.5% for the year to March, the weakest since late 2008, coinciding with a large fall in approvals, particularly for apartments.

Investors have been hit the hardest on the back of tighter lending measures, with investor loans down 2.7% in March, the 8th consecutive month of decline. APRA recently ended its cap on investor loan growth, while other restrictive measures remain in place. With uncertainty heading into the Federal Election, on the back of Labor’s policies around negative gearing and capital gains, means investors are unlikely to re-enter the market any time soon. 

On a slight positive, first-home buyers as a proportion of all dwellings increased to 18% in March, on the back of falling prices resulting in an improvement in affordability. However, it is too early to say there is a convincing uptrend in first home buyers in the market. 

While there have also been some tentative signs of improvement in higher auction clearance rates, and an easing in price declines in Sydney and Melbourne, yesterday’s data suggests housing demand remains weak. Negative sentiment and entrenched expectations of further declines in house prices, suggest soft conditions are likely to persist for a while longer. 

Value of Housing Finance 

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, Dow Jones, Australian Market, ASX, international markets

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