Morning Market Update - 21 May 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 fell to 0.3%, below consensus of 0.4%.
  • Wednesday – UK – Consumer Price Index fell to an annual rate of 0.8% in April from 1.5% in March, the biggest decline since 2008.
  • Thursday – EUR – Markit Manufacturing PMI
  • Thursday – US – Markit Manufacturing PMI

    S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket rose 0.2% yesterday, after rebounding from early losses of almost 1%, to close higher for a fourth straight day. The Information Technology and Materials sectors were the strongest performers, while the Utilities and Energy sectors were the laggards.

The big four banks continued their run of gains, all closing between 0.5% and 0.7% higher to help buoy the Financials sector. Investment manager Challenger lifted 3.6%, while Macquarie Group fell 1.1%.

Consumer stocks were mixed; Australia's largest horticultural company, Costa Group, closed up 9.6%, while Bega Cheese fell 3.5% and Freedom Food Group lost 0.9%.

The Health Care sector was mixed; CSL slipped 0.7%, while Sonic Healthcare added 0.2%, Ramsay Health Care rose 0.4% and Cochlear lifted 1.7%.

The Australian futures market points to a 0.64% rise today, driven by stronger overseas markets.

Overseas Markets

European sharemarkets rose on Wednesday, boosted by optimism of an economic recovery following the easing of lockdowns, with the broad based STOXX Europe 600 up 1.0%. UK real estate company Rightmove lifted 4.0%, while water services company United Utilities added 3.2%. UK banks closed higher, with Barclays and Lloyds up 1.9% and 1.0% respectively. European company HelloFresh gained 4.1%, while Nestlé closed 0.5% lower.

US sharemarkets also closed higher overnight, with all sectors in the black. Facebook lifted 6.0%, to close at an all-time high, after the company announced a new feature, Facebook Shop. Other technology names also outperformed; Amazon rose 2.0% to be at a record high, Alphabet added 2.4%, while Apple and Microsoft gained 1.9% and 1.4% respectively. Financials stocks also saw strong gains; MasterCard and Visa rose 2.8% and 2.4% respectively, while PayPal added 3.8%. Energy stocks were amongst the best performers as the WTI crude oil price rose, Chevron lifted 3.8% and Exxon Mobil added 3.3%.

By the close of trade, the Dow Jones added 1.5%, the S&P 500 gained 1.7% and the NASDAQ lifted 2.1%.

CNIS Perspective

Massive fiscal and monetary policy stimulus are widely cited as the most powerful forces behind the 30% plus bounce in stocks since the 23 March bottom.

However, some concern has been voiced that government and central bank intervention short-circuits the creative destruction process that helps make the economy more productive. In our new world, bailouts, backstops and safety nets are a reality, while long-accepted rules of capitalism are changing. Investors who expect markets to adhere to traditional clearing and price discovery dynamics are finding themselves frustrated.

Economist, Torsten Slok, believes that 1,600 companies in America go under every week when times are good. Most of these companies are one to five employees, but that's how creative destruction works and how capitalism functions.

A lot of these companies that would have died of natural causes in the evolution of capitalism are currently being saved by the stimulus package. They may have gone under anyway, but they're being kept alive for now.

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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