Morning Market Update - 14 May 2020


Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Wednesday – AUS – Westpac Consumer Confidence rebounded sharply in May, lifting from a 29-year low of 75.6 in April to 88.1. The reading suggests there is increased optimism over how Australia has dealt with the coronavirus.
  • Wednesday – UK – Gross Domestic Product fell 2.0% in Q1 and 5.8% in the month of March alone.
  • Thursday – AUS – Unemployment Rate

    S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket rose 0.35% yesterday, after being down as much as 1.8% in the first hour of trade. The REITs, Energy and Utilities sectors were the main drags on the market, consumer stocks were relatively flat, while all other sectors closed positive.

Commonwealth Bank (CBA) announced it has sold its wealth management arm, Colonial First State, to US investment firm KKR for $1.7 billion. CBA rose 1.9% to lead the Financials sector higher, while all other big banks rose between 0.4% and 0.8%.

REITs were the underperformers; GPT Group fell 2.0% despite the company stated half of the shops at its shopping centres were trading this week, Charter Hall Retail fell 2.9% and Stockland Corporation fell 1.1%.

Regional Express airline soared 32.2% after announcing it would decide within eight weeks whether it would launch domestic operations between major cities in Australia next year following Virgin Australia entering voluntary administration.

The Materials sector was also stronger, with mining heavyweights BHP and Rio Tinto up 0.9% and 1.4% respectively, while Fortescue Metals added 3.9%.

The Australian futures market points to a 1.08% fall today, driven by weaker overseas markets.

Overseas Markets

European sharemarkets fell on Wednesday, with the broad based STOXX Europe 600 down 1.9%. The Financials sector underperformed; Deutsche Bank lost 6.4%, Commerzbank fell 7.1%, Barclays was down 3.9% and Lloyds slipped 2.9%.

US sharemarkets also closed lower overnight, with all sectors in the red. Federal Reserve Chair Jerome Powell stated the Fed is not looking to go into negative rates, with some analysts suggesting the comments could signal possible asset buying and more formal quantitative easing programs. PayPal and Amazon bucked the trend, closing up 1.9% and 0.5% respectively.

By the close of trade, the Dow Jones fell 2.2%, the S&P 500 lost 1.8% and the NASDAQ slipped 1.6%.

CNIS Perspective

The latest escalation in US-China tensions comes as Trump blames China for the COVID-19 pandemic.

The Trump administration ordered that an American federal pension fund, the Thrift Savings Plan, with around US$600bn under management for 5.9 million Americans, to stop investing in all Chinese companies. The White House says they pose national security threats and might become subject to sanctions.

Yesterday, the pension fund halted planned investments into China, which angered Beijing, who suggested such a move will only hurt American investors. They may well be correct.

Anti-Chinese rhetoric is not new and has been a Trump stance since the day he was elected. As Trump has fallen behind in the polls with less than 6 months until the election, the target on China just got bigger.

Whilst it would seem unfavourable to the sharemarket to stir up a financial war between the world’s two largest economies. Trump is staring down the barrel of 20-25% unemployment in the coming months and understands the political pressure this creates.

Diverting the anger and focus towards China might be the best play for Trumps re-election ambitions, but the economic damage this approach might incur will likely only delay the US’s recovery from the pandemic.

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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