Morning Market Update - 16 August 2019

Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Thursday – AUS – Unemployment Rate held steady at 5.2% in July, while the workforce participation rate edged up 0.1%, to hit a new record high in July of 66.1%.
  • Thursday – US – Retail Sales increased 0.7% in July, after gaining 0.3% in June.
  • Friday – US – Housing Starts
  • Friday – EUR – Trade Balance

S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket followed the lead of overseas markets to close 2.8% lower yesterday, as all sectors ended the session weaker. Despite three weeks of losses, the ASX 200 has gained 13.5% since January 1.

Energy stocks were the worst performing, following weaker global oil prices on Wednesday night, with Santos, Origin Energy, Oil Search and Beach Energy all closing down between 3.5% and 7.3%. Woodside Petroleum gave up 6.7%, as Australia’s largest oil and gas producer announced a 23% slide in net profit for 1H19 and cut its interim dividend from US$0.53 to US$0.36.

Supercheap Auto was the standout performer in the ASX 200, closing up 4.2%, after announcing an 8.6% rise in full year profit. In contrast, Telstra gave up 1.8%, after reporting a 40% fall in full year profit to $2.15 billion, while Blackmores tumbled 14.9% to a four-year low, after the vitamins maker reported a 24% fall in full year net profit and cut its dividend.

The Australian futures market points to a 0.36% fall today.

Overseas Markets

European sharemarkets fell again on Thursday after China warned of retaliation against US tariffs. The broad based STOXX Europe 600 slid 0.3%, the German Dax lost 0.7% and the UK FTSE fell 1.1%.

US sharemarkets were mixed overnight, as solid retail sales data boosted the local indices. Multinational retail giant Wal-Mart announced better than expected earnings figures, ending the session 6.1% higher. However, General Electric fell 11.3% on a report that raised questions regarding the company's financial stability. By the close of trade, the Dow Jones had gained 0.4% and the S&P 500 rose 0.3%, however, the NASDAQ slipped 0.1%.

CNIS Perspective

The inverted US yield curve of the last few days has certainly attracted a great deal of attention and sparked speculation about a recession in the US.

There’s no question the inverted yield curve has been a reliable indicator of previous recessions, but it’s important to note a couple of key points with this.

A recession is defined as two consecutive quarters of negative GDP growth. Currently US GDP growth is sitting at an annual rate of 2.1% and this level of growth has been relatively consistent for some time. The average annual GDP growth rate in the US has averaged 3.21% since 1947.

It seems there’s little chance of one quarter’s negative GDP any time soon, let alone two.

What is also notable with the relationship between the inverted yield curve and recession, is the recession tends to occur 12 - 15 months after the yield curve inverts.

What we are seeing now is more like a mid – cycle slowdown following the second quarter earnings season and a reset of both profit and equity market expectations, rather than the onset of a recession.

The word “recession” grabs headlines, and at this stage it seems more like a headline than a reality.

10 Year Treasury Note Yield at Constant Maturity

Cutcher & Neale Investment Services 25 Year Anniversary

My how time flies!!

Yesterday, Cutcher & Neale Investment Services clocked up its 25 year anniversary. 

A lot has changed over the years: compliance obligations, technology and not to mention the ever-changing economic environment.

Financial markets are rarely predictable and often volatile, and we strive to move quickly in anticipation of, or in response to, a change in economic conditions.

This ability to execute swiftly is fundamental to us being able to protect your capital and take advantage of opportunities.

There have been a lot of changes, but the drive and determination to protect your wealth and make it grow, in the most transparent and compliant fashion remains paramount, and always will.

There’s no doubt in my mind that we are better equipped to manage investment portfolios now, than we have ever been.

Last year, I was honoured to be names the SMSF Investment Strategist of the Year, and Cutcher & Neale team was awarded SMSF Firm of the Year. These awards are great recognition for everyone at Cutcher & Neale and the hard work we all put in our clients.

We have always aimed to ensure you received the most incisive financial advice, and will continue to do so. Traditional values and innovative thinking remain at the heart of what we do.

There is nothing more rewarding to us than to engage with our clients, and see them succeed. 

It’s been a challenging and rewarding 25 years. No doubt the next 25 will be also – and I look forward to sharing the journey with you.

Phil Smith

Cutcher & Neale Investment Services Partner

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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