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Morning Market Update - 15 August 2017

 

Pre-Open Data

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Key Data for the Week

Key economic data released this week:

  • Monday – UK – Industrial Production fell 0.6% in June, after a solid rise of 1.2% in May. As a result, annual growth slowed from 3.9% in May to 2.6% in June.
  • Tuesday – AUS – RBA Meeting Minutes
  • Tuesday – UK – Consumer Price Index
  • Tuesday – US – Retail Sales

Australian Market

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The Australian sharemarket ended the session higher yesterday, led by gains in the Information Technology and Financials sectors. The big four banks all rose over 0.5%, led by NAB and Westpac, which gained 1.8% and 1.2% respectively.

Bendigo and Adelaide Bank Ltd (BEN) released its FY17 earnings, reporting a 1.4% EPS increase to $0.885. Net interest income grew strongly on solid margin improvement in 2H17 and its Common Equity Tier 1 ratio was stronger than expected. BEN increased $0.84, to close 7.5% higher at $12.10.

JB Hi-Fi Ltd (JBH) reported a 42.3% increase in FY17 revenue, to $5.6bn, and a 22.4% increase in underlying EPS to $1.86, buoyed by the $870m acquisition of The Good Guys. Organic sales increased 10.5%. However, the earnings result was below expectations, with JBH declining $0.96, to close 3.8% lower at $24.41.

The Australian futures market points to a 0.37% rise today, being driven by broadly stronger international markets overnight.

Overseas Market

US sharemarkets rose for the second straight session on Monday. Technology shares rallied sharply to support the broader market, with Apple, Facebook, Mastercard and Visa each rising at least 1.5%.

European sharemarkets were also stronger on Monday, led by banking stocks. Fiat Chrysler was a standout, jumping more than 8%, after a report suggested large Chinese automakers were looking to acquire the company. The German DAX and UK FTSE 100 gained 1.3% and 0.6% respectively.

CNIS Perspective

Foreign exchange (FX) markets are regarded the most difficult to forecast, due to the myriad of factors and market participants that influence them, and the events of the past week or so highlight this. As tensions mounted between North Korea and the US last week, financial markets saw a flight to safety, or ‘risk-off’ attitude, that resulted in equity markets falling, bond markets rallying and the USD strengthening.

Roll forward to the weekend, when concerns over escalating hostilities were hosed down, and we see a reversal of last week’s sell-off. As a result, the Dow Jones rose last night to be back in positive territory for the month of August, the S&P 500 put on 1%, the NASDAQ recovered 1.34%, while the safe haven bond market fell. The Volatility Index also retraced back towards its one year average of 12.37 after hitting 16 last Friday.

What is interesting is the USD actually strengthened last night against a broad basket of currencies, when one would have thought a ‘risk-off’ attitude would have seen it also weaken. Against the AUD, the USD has strengthened to US$0.7853.

However, the FX market is already looking forward to some positive news from US GDP data for the second half of the year and July retail sales, due to be released this week.

That could get the US Federal Reserve back on track for at least another rate rise before the end of the calendar year, which will heighten confidence in the US economy and therefore support the USD.

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Contact Us

Should you wish to discuss this or any other investment related matter, please contact our Investment Services Team on (02) 4927 8844.


Disclaimer

The material contained in this publication is in the nature of general comment only, and neither purports, nor is intended to be advice on any particular matter.  Persons should not act or 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: Investment, CNIS, Volatility Index, Market Update, Federal Reserve, VIX, USD

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