Morning Market Update - 19 February 2020

Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Tuesday – AUS – RBA Meeting Minutes revealed the clear theme was the uncertain times facing RBA policymakers. Despite the ongoing uncertainties, the RBA continues to expect economic growth to return to trend this year and grow above trend in 2021.
  • Tuesday – UK – Unemployment Rate remained steady at 3.8% for the three months to December.
  • Wednesday – UK – Consumer Price Index
  • Wednesday – US – Housing Starts

    S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket fell 0.2% yesterday, with the Information Technology sector the weakest performer. Altium fell 7.9%, after the printed circuit board software company said its full year revenue would be down due to the impact of the coronavirus and a slower start to its Octopart search engine.

The Financials sector was lifted by the big banks; Commonwealth Bank rose 0.9%, Westpac added 0.5%, ANZ lifted 0.3% and NAB closed flat. Bendigo and Adelaide Bank dropped 5.6% after resuming trade following a $250 million institutional placement. Elsewhere, wealth manager IOOF Holdings was flat after a 15% fall in first-half profit and investment platform company Netwealth dropped 5.2%, despite reporting a first-half profit of $20.5 million, up 20.6% from a year ago.

Cochlear fell 3.4% after it reported a stable first-half profit of $132.7 million. The group re-iterated its recently revised earnings guidance, to be partly offset by the impact of the coronavirus on sales in China. FY20 net profit is expected to be in the region of $270-290 million, a 2-9% increase on FY19.

Seven West Media plummeted 21.2% to an all-time closing low of $0.205, after announcing a $67 million first half loss, as Australia's television advertising market continued to decline.

The Australian futures market points to a 0.1% rise today.

Overseas Markets

European sharemarkets fell on Tuesday. Glencore PLC dropped 4.5%, despite reporting FY earnings that beat market expectations. HSBC Holdings slumped 6.0%, as it plans to shed around 35,000 jobs as part of a radical downsizing of its operations in Europe and the US, as it warned of threats to its business from social unrest in Hong Kong and the coronavirus outbreak.

US sharemarkets were mostly lower overnight, with Financials and Energy stocks the weakest performers, while the Utilities sector outperformed. Apple fell 1.8% after it said in a press release on Monday that it does not expect to meet its Q2 revenue guidance of US$63bn - US$67bn due to the coronavirus outbreak.

CNIS Perspective

Economic data released so far in 2020 has shown some bright sparks in the Australian economy, but the overall economic picture remains grey.

Unemployment rate data to be released tomorrow is one to keep an eye on, as it will be a key indicator for how well the labour market is holding up in this current environment.

Recent data on the labour market has been encouraging. Two bumper months of employment gains in a row, has seen the unemployment rate fall from 5.3% in October to 5.1% in December.

The RBA expects the unemployment rate to decline to around 4.75% in 2021, not far from what is regarded as full employment if the current trajectory and expectations remain.

However, with a number of short-term challenges experienced this summer, especially the bushfires and coronavirus on our local tourism industry, it is hard to see the RBA’s expectations being realised.

A tick up in the unemployment rate tomorrow may rein in some of the RBA’s optimism, and provide important clues to the market about the prospect for further rate cuts in the coming months.

Unemployment Rate Forecast

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.

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Topics: CNIS, Australian Market, ASX, international markets

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