Morning Market Update - 16 March 2020


Pre-Open Data

1

Key Data for the Week

Key economic data released this week:

  • Monday – CHINA – Industrial Production
  • Monday – CHINA – Retail Sales
  • Tuesday – AUS – RBA Meeting Minutes
  • Tuesday – UK – Unemployment Rate
  • Tuesday – US – Retail Sales
  • Wednesday – EUR – Consumer Price Index
  • Wednesday – US – Fed Interest Rate Decision
  • Thursday – AUS – Unemployment Rate
  • Friday – US – Existing Home Sales

    2

Australian Market

The Australian sharemarket staged a remarkable recovery on Friday to end the session up 4.4%, despite earlier being down as much as 8.1% in morning trade. A number of events contributed to the rally; Prime Minister Scott Morrison was addressing the media at the time, while in the US, House Speaker Nancy Pelosi told reporters the Democrats and the Republicans were close to agreeing to a stimulus package.

Health Care was the best performing sector, led by strong gains from Cochlear (21.1%), CSL (11.9%) and Ramsay Heath Care (6.9%). 

The Financials sector was boosted by the big four banks, which all ended the session between 1.5% and 5.1% higher, with Commonwealth Bank the best performer. Consumer stocks posted strong improvements; Coles gained 8.7%, Wesfarmers lifted 8.0% and Woolworths added 6.7%. Telstra rose 6.4% to help lift the Telecommunications sector higher.

The Australian futures market points to a 1.08% rise today, driven by stronger global markets on Friday.

Overseas Markets

European sharemarkets ended a six-day losing streak on Friday, led by gains from the Resources index, while travel and leisure companies continued to fall, with the sector down a further 2.4%. The UK FTSE 100 lifted 2.5%, the broad based STOXX Europe 600 rose 1.4% and the German DAX climbed 0.8%. The Italian FTSE MIB posted a 7% improvement, bouncing back from a seven-year low, while the Spanish IBEX 35 strengthened 3.7%, underpinned by bank stocks, which were supported by higher euro zone bond yields.

US sharemarkets strengthened on Friday, as all key indices posted their biggest daily percentage gain since October 2008, after a national emergency declaration was made by President Trump. Apple rose 12% after the company announced it will reopen all its 42 branded stores in China. Fellow technology heavyweights Intel (19.5%), Microsoft (14.2%), Facebook (10.2%), Alphabet (9.4%) and Amazon (6.5%) also posted strong gains, while payment companies PayPal, MasterCard and Visa added 13.6%, 11.8% and 9.8% respectively. By the close of trade, the Dow Jones and NASDAQ both climbed 9.4%, while the S&P 500 lifted 9.3%.

CNIS Perspective

The US Federal Reserve cut its Federal Funds Rate by a full percentage point this morning, having previously delivered an emergency 50 basis point rate cut earlier this month.

Below is a list of key actions taken by the central bank to support markets that have recently been impacted by the coronavirus outbreak and the oil price war. The US Federal Reserve has announced it has:

  • Lowered the Federal Funds Rate to zero, a cut of 1%, to a range of 0% - 0.25%.   
  • Announced US$700bn in asset purchases, comprised of US$500bn in Treasury securities and US$200bn in agency backed mortgage securities.
  • Worked with the global central banks of Canada, England, Japan, Switzerland and the European Union to lower pricing on US dollar liquidity swap arrangements by 25 basis points, effectively giving these banks access to US dollars in exchange for their own currency.
  • Lowered primary credit rates by 150 basis points to 0.25%, effective 16 March.
  • Reduced bank reserve requirement ratios to 0%, effective 26 March.

The word unprecedented is being used a lot at the moment. These are drastic moves to support liquidity in the bond market and stabilise the extreme volatility of the past three weeks.  

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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