Morning Market Update - 24 June 2020


Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Tuesday – US – Markit Manufacturing PMI rose 9.8 points in June to 49.6, above expectations and the highest mark in four months as businesses reopened.
  • Tuesday – US – New Home Sales rose to 676,000 for May, above expectations for 632,000.
  • Wednesday – US – Housing Price Index

        S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket rose 0.2% yesterday, in a mixed session of trade. The Consumer Discretionary sector outperformed; Harvey Norman rose 4.9% after the company announced a 20% rise in profit, Adairs lifted 4.8% and JB Hi-Fi gained 4.1%. 

Cromwell Property Group lifted 8.1% to help lift the REITs sector, after the company received a takeover offer from ARA Asset Management to help.

Investment manager Challenger slumped 9.8% after the company completed a $270 million capital raise. The big four banks were mostly lower; Commonwealth Bank, NAB and Westpac all fell between 0.6% and 0.7%, while ANZ rose 0.1%.

Woolworths slipped 0.8% after announcing its full-year earnings could be 2.7% lower, amid an increase of $275 million in costs for the June quarter related to COVID-19 store hygiene, social distancing requirements and supply chain flexibility. 

Mining heavyweights BHP and Rio Tinto rose 0.8% and 1.4% respectively to help lift the Materials sector. 

The Australian futures market points to a 0.15% rise today.

Overseas Markets

European sharemarkets rose on Tuesday, following signs that business activity was rebounding faster than expected. In the UK, Prime Minister Johnson confirmed that pubs, restaurants, hotels and hairdressers will be allowed to reopen with coronavirus precautions in place from 4 July. Lloyds Bank and Barclays rose 3.5% and 1.4% respectively to help lift the Financials sector. UK real estate company Rightmove slipped 4.1%, after the company announced it will extend its discount support over August and September, which will result in a reduction in revenue of £17-20 million, in addition to the £65-75 million impact expected for the discount during April to July. By the close of trade, the broad based STOXX Europe 600 rose 1.3%.

 

US sharemarkets also closed higher overnight, as President Trump said the US-China trade deal was fully intact after White House trade adviser Peter Navarro told Fox News the deal was over. The Consumer Discretionary, Information Technology and Health Care sectors led the gains. Alibaba and Amazon gained 3.3% and 1.9% respectively, Apple lifted 2.1%, Facebook rose 1.3% and Microsoft rose 0.7%. Cybersecurity company Fortinet slipped 4.1%, while still being near all-time highs.

 

By the close of trade, the Dow Jones rose 0.9%, the S&P 500 added 1.0% and the NASDAQ gained 1.3%.

CNIS Perspective

As the squeeze on household incomes becomes more apparent, mortgage delinquency rates in the US are on the rise. In May, the delinquency rate rose to 7.76%, from 6.45% in April and 3.39% in March. The total number of loans in arrears, by more than 30 days, has risen to 4.3 million, the highest level since November 2011.

 

With high unemployment across the US, significant pressure remains on household incomes, and with government stimulus for unemployed Americans of US$600 per week set come to an end in July, it’s hard to see these numbers begin to reverse anytime soon.

 

Australia has its own issue to deal with in this regard. Delinquency rates have been benign to date and not showing the same level of distress, however, this is due to Australian banks offering borrower’s loan deferrals.

 

The current deferral scheme and government JobKeeper and JobSeeker packages are due to expire at the end of September. With over 770,000 home and business loans worth $237bn currently deferred, it’s only a matter of time before delinquency rates begin to rise here.

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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