Morning Market Update - 24 March 2020


Pre-Open Data

1

Key Data for the Week

Key economic data released this week:

  • Monday – US – Chicago Fed National Activity Index rose to 0.16 in February, from -0.33 in January. However, this reflects a period largely unaffected by the coronavirus. A reading above -0.35 has historically meant the economy is expanding.
  • Tuesday – EUR – Markit Manufacturing PMI
  • Tuesday – US – Markit Manufacturing PMI

    2

Australian Market

The Australian sharemarket resumed its sell-off yesterday, ending the first trading session of the week 5.62% lower, as more states closed their borders and businesses were forced to shut in an effort to combat the continuous spread of the coronavirus. Losses were broad based, with Health Care the only sector to close higher, boosted by strong sessions from CSL and Sonic Healthcare, which gained 4.2% and 6.2% respectively. The uncertainty around the future economic impact of the coronavirus continued, with several companies, including Bingo Industries, Link Administration, nib Holdings and Stockland, all suspending FY20 guidance.

Goldminers were outperformers; Newcrest Mining gained 4.5%, Northern Star climbed 2.3% and Evolution lifted 0.8%. Other stocks in the Materials sector were not as fortunate; BHP managed to eke out a 0.1% gain, however, Rio Tinto fell 4.0% and Fortescue Metals slid 7.7%.

Property trusts, traditionally viewed as defensive stocks, were among the hardest hit, with the REITs sector down 11.2%, dragged lower by Goodman Group, Dexus and Mirvac, which all fell between 11.2% and 12.0%.

The Australian futures market points to a 0.87% gain today.

Overseas Markets

European sharemarkets fell on Monday, with investors concerned the widespread lockdowns in the region from the coronavirus outbreak will result in economies falling into a recession. Travel and leisure stocks resumed their underperformance, as Greece became the latest nation in the region to go into lockdown, while the Industrials sector fell 6.0%, amid widespread factory shutdowns in an attempt to reduce the spread of the coronavirus. Nestlé slid 6.0%, after its Chief Executive informed employees to prepare for a “coronavirus storm” and make all necessary efforts to supply the food and beverages needed by their customers.

US sharemarkets also closed down overnight, however, all three major indices did rebound from their intraday lows. Energy, Financials and Health Care stocks were among the worst performers, with Consumer Discretionary the only sector to close higher. Amazon posted a 3.1% gain, while Boeing and Netflix rose 11.2% and 8.2% respectively, following broker upgrades. Hasbro strengthened 12.5%, after the CEO of the toy maker announced there had been “great demand” for their products and Chinese supply chains are back up and running. The company expects to be completely caught up by April. By the close of trade, the NASDAQ slipped 0.3%, the S&P 500 weakened 2.9% and the Dow Jones slid 3.0%.

CNIS Perspective

Amongst all the instability and anxiety currently circulating across the globe, governments and central banks have been broadly working hard to do whatever necessary to limit the economic impact on their nation.

Leaders understand the severity of this situation and have been putting politics aside, in a coordinated effort.

That seems the case everywhere except in the US right now, where an election year seems to be hampering this process to reach a bipartisan agreement on fiscal stimulus.

The Democrats have the power in the Senate, and for the second straight day, massive economic stimulus package negotiations are breaking down. The latest, an almost US$2tn economic stimulus package, failing to gain the necessary 60 vote threshold to pass in the Senate.

This leaves the burden weighing solely on the US Federal Reserve to keep pulling strings to provide liquidity throughout this process, which is no doubt becoming frustrated with both sides of Parliament while debate continues.

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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