Morning Market Update - 17 March 2020


Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Monday – CHINA – Industrial Production fell 13.5% in February, compared with a year earlier.
  • Monday – CHINA – Retail Sales plunged 20.5% year on year in February, below expectations of a 4.0% fall.
  • Tuesday – AUS – RBA Meeting Minutes
  • Tuesday – UK – Unemployment Rate
  • Tuesday – US – Retail Sales

    S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket was down 9.7% as the coronavirus epidemic worsened. Market declines were broad based, with most sectors falling at least 10%.

Energy was the weakest performer; Oil Search lost 19.8%, Santos fell 17.7% and Woodside Petroleum slipped 14.4%.

The big four banks all closed sharply lower amid the dramatic fall in bond yields and ahead of a looming RBA Quantitative Easing announcement. ANZ slumped 12.5%, NAB fell 12.4%, Westpac lost 11.8% and Commonwealth Bank lowered 10.0%.

CSL fell 10.4%, while Cochlear dropped 19.3% after the company withdrew FY20 earnings guidance due to the coronavirus outbreak but said it is confident it can meet future cash requirements.

Consumer Staples were relatively stronger; Woolworths weakened 2.0% and Coles lost 1.1%. The Telecommunications sector was also weaker, however, Telstra bucked the trend to rise 1.8%.

The Australian futures market points to a 4.3% fall today, driven by weaker international markets.

Overseas Markets

European sharemarkets were weaker on Monday, with the broad based STOXX Europe 600 down 4.9%. Airlines continued to come under pressure; International Airlines Group slumped 27.0%, EasyJet lost 22.9% and Ryanair fell 19.8%.

US sharemarkets fell overnight, after the Fed cut rates by 100bps to 0-0.25% on Sunday. Apple lost 12.9% after the company announced it will close all stores outside China until 27 March. Biotechnology company Moderna, rose 24.4%, after the company announced the first coronavirus vaccine trial had begun, with 45 patients set to receive different doses of shots. However, the company noted it could take 12-18 months to fully validate any potential vaccine.

By the close of trade, the Dow Jones fell 12.9%, the NASDAQ lost 12.3% and S&P 500 weakened 12.0%.

CNIS Perspective

It’s not the sort of record investors want to be a part of, particularly when it refers to the level of fear in the market, but the Volatility Index (VIX), or ‘fear index’ as it’s often referred to, is fast approaching its highest level on record.

The GFC is the last time the VIX had such a run. On the 24th of October 2008, the index hit 89.53 and last night after jumping 42.99%, hit an intraday high of 83.56.

Last night US stocks were falling so fast they hit a trading pause for the third time in a week.

This follows last week, where the S&P 500 recorded its biggest plunge since the crash of October 1987.

It seems a long way from the benign investing days during 2017, when the VIX hardly got above 12.

The GFC seems a ripple in the water compared to this current market crash.

The big question is whether the VIX hits a new record or not.

It seems likely.

VIX - Last Month

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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