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Morning Market Update - 22 November 2019


Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

    • Thursday – US – Existing Home Sales rose 1.9% in October, to an annualised rate of 5.46 million. Low mortgage rates continue to underpin demand for dwellings.
    • Thursday – US – Initial Jobless Claims were 227,000 for the week to 15 November, above expectations for 219,000.
    • Friday – US – Markit Manufacturing PMI

S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket fell for a second day, down 0.7%, with losses across all sectors. The Financials sector was lead lower by Westpac, down 2.0%. Prime Minister Scott Morrison urged the bank to consider Chief Executive Brian Hartzer's position over the bank's money laundering and child exploitation scandal. The other big banks also weakened; ANZ lost 0.4%, while Commonwealth Bank and NAB both fell 0.3%.

Iron ore miners were the main drag on the Materials sector; Fortescue Metals fell 1.8%, BHP lost 1.4% and Rio Tinto weakened 1.2%.

Energy stocks extended declines amid the recent oil market weakness. Santos and Woodside Petroleum were down 1.6% and 1.2% respectively, while Oil Search lost 1.0%.

The Health Care sector was mostly weaker; CSL and Ramsay Health Care fell 1.2% and 1.1% respectively, while Cochlear bucked the trend to rise 0.3%.

The Australian futures market points to a 0.55% rise today.

Overseas Markets

European sharemarkets closed lower on Thursday, weighed down by the Materials and REITs sectors. By the close of trade, the broad based STOXX Europe 600 fell 0.4%.

US sharemarkets also fell overnight, with US-China trade headlines the main focus. Defensive REITs and consumer stocks saw the biggest declines, while the Energy sector outperformed the market. Technology stocks also weakened; Amazon lost 0.6% and Apple fell 0.5%, while Alphabet and Microsoft both slipped 0.1%. Financials services companies PayPal and Visa lost 1.5% and 1.0% respectively, while MasterCard fell 0.3%. By the close of trade, the S&P 500, Dow Jones and NASDAQ all slipped 0.2%.

CNIS Perspective

The last 12 months has seen investor inflows into the Australian Exchange Traded Fund (ETF) bond market increase by 77%, jumping from $1.3 billion to $2.9 billion.

A spokesperson for one of the larger ETF providers, BetaShares, cites investor conservatism as driving the demand, with investors “recognising that the equity markets are pretty expensive”.

Paradoxically, it’s this demand for ‘safe haven’ bond investments that is making the bond market riskier, as investors drive bond prices upwards significantly and yields down.

The yield on an Australian government 10-year bond is just 1.07%, which is down from 3% just two years ago.

The bond market is traditionally a more conservative space in which to invest, but one still needs to be aware of the price paid.

Yield and price are inverted, and when yields shrink closer to zero, it means the prices are rising just as hard.

Australian 10 Year Government Bond Yield

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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