Morning Market Update - 19 March 2020


Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Wednesday – EUR – Consumer Price Index remained at 0.4% for the month of February and 1.2% on an annual basis.
  • Thursday – AUS – Unemployment Rate

    S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket was down 6.4% yesterday, with every sector lower. Energy was the worst hit, as the price of Brent crude dropped to its lowest level since 2004; Woodside Petroleum fell 8.8% and Santos lost 12.3%.

The Information Technology sector also suffered heavy losses, as former market darling Afterpay suffered the worst losses of the day among ASX 200 components, down 33.1% to $12.76.

The big four banks all fell between 5.5% and 9.7% ahead of an announcement by the Reserve Bank today.

Property trusts were sold off, Westfield owner Scentre Group plunged 16.3% to an all-time low of $1.80, despite assuring shareholders its financial position was strong and its malls would remain open.

Prime Minister Scott Morrison announced an international travel ban for an indefinite period for Australian travelers. Qantas fell 11.5%, Webjet slumped 13.5% and Flight Centre was down 4.8%.

Gold miners were the best performers; St Barbara lifted 9.0%, Northern Star added 7.8% and Saracen rose 7.0%.

The Australian futures market points to a 1.45% fall today, driven by weaker international market.

Overseas Markets

European sharemarkets were down on Wednesday, as the broad based STOXX Europe 600 fell 3.9%. Oil and gas companies were among the worst hit; John Wood Group and Tullow Oil were down 21.7% and 16.9% respectively. Consumer stocks Tesco and Nestlé both outperformed, up 1.2% and 0.4% respectively, while Danone SA added 2.9%. Water services company United Utilities lifted 5.0%.

US sharemarkets fell overnight, with Energy the worst performer. Airlines stocks continued their weak performance; American Airlines fell 25.2% and Boeing lost 17.9%. Consumer stocks were supported; Walgreens Boots gained 6.5%, Wal-Mart and Kroger both added 2.8%, while Costco rose 0.2%. Amazon and Gilead Sciences also outperformed, up 1.2% and 6.6% respectively.

By the close of trade, the Dow Jones fell 6.8%, the S&P 500 weakened 5.7% and the NASDAQ lost 4.5%.

CNIS Perspective

Thankfully, it is rare that central banks shift policy meetings and make unscheduled announcements, as its not usually a good sign.

On Sunday, the US Federal Reserve cut their benchmark interest rate to a range of 0 – 0.25%, its lowest level on record, while also making it cheaper and more convenient for banks to borrow directly from its ‘discount’ window.

In times of crisis, such as recessions, wars or today’s Covid-19 pandemic, investors generally flock to US Treasuries as a safe haven, driving their prices up and yields down. However, this was not the case last night, as the price of Treasuries fell alongside those of riskier assets, such as shares. 

The Fed also announced it would purchase at least US$500bn of Treasuries and US$200bn of mortgage-backed securities, at whatever pace necessary to smooth out the market.

At present, the Fed is only seeking to purchase safe, government-backed securities, which has in the past been extended to stocks when the Fed deemed necessary. After the GFC in 2008, the TARP (Troubled Asset Relief Program) saw the Fed do a similar spend (~US$1.2tr), yet this took many months to initiate and feed into the system. This time, the 2020 Fed rescue response has taken a matter of weeks and is globally co-ordinated.

Whilst central banks actions have been swift and will continue to be so, their responses do take time to seep into the system. In the meantime, investor anxiety will continue.     

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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