Morning Market Update - 25 February 2020


Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Monday – US – Chicago Fed National Activity Index improved in January. However, it remained in negative territory at a reading of -0.25 for the month, following a reading of -0.51 in December 2019.
  • Tuesday – US – Consumer Confidence
  • Tuesday – US – S&P/Case Shiller Home Price Indices

    S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket suffered its worst trading session since 15 August yesterday, as all sectors closed lower amid concern over the increase in new coronavirus cases in countries including Italy, Iran and South Korea. Losses were broad based, with 93% of all companies in the ASX 200 ending the session lower.

The Energy sector was the worst performer, as companies came under pressure on concerns of reduced demand for oil. Santos gave up 3.3% and Oil Search dropped 3.2%, while Woodside Petroleum lost 6.4%, after the stock went ex-dividend.

Goldminers were a rare bright spot in the market, as the price of the precious metal rose to US$1,660 an ounce, its highest price since January 2013. Heavyweight goldminer Newcrest Mining gained 5.1%, while Saracen Mineral and St Barbara rose 7.4% and 4.9% respectively.

Ardent Leisure Group fell 16.3%, after a Queensland coroner referred the Dreamworld operator to the Queensland Office of Industrial Relations for possible prosecution in relation to the 2016 Thunder River Rapids ride tragedy.

The Australian futures market points to a 2.47% fall today, being driven by broadly weaker global markets overnight.

Overseas Markets

European sharemarkets tumbled on Monday, as a surge in new coronavirus cases outside of China caused investors to reassess the potential impact of the current outbreak. Airline stocks led the declines, with Air France, EasyJet, Lufthansa and Ryanair all closing down between 7.4% and 12.6%. The Italian FTSE MIB slumped 5.4% to register its worst day since mid-2016, as the nation recorded the largest increase in new coronavirus cases in Europe. By the close of trade, the broad based STOXX Europe 600 lost 3.8%, with only six stocks in the index ending the session higher, while the German DAX and the UK FTSE 100 slid 4.0% and 3.3% respectively.

US sharemarkets also fell sharply overnight, with all sectors closing lower. Energy stocks were among the worst performers, dragged lower by weaker global oil prices, while the Technology sector lost 4.1%, weighed down by Apple, which gave up 3.6%, after data released highlighted sales of smartphones in China had fallen by more than a third in January. The S&P 500 closed down 3.4%, while the Dow Jones slipped 3.6% and the NASDAQ fell 3.7%.

CNIS Perspective

US stocks fell the most in two years overnight, with equity markets around the world beginning to price in what bond markets have been indicating for weeks, that is, global growth is likely to be impacted in a meaningful way due to the coronavirus. 

Falling oil and gas markets is a telling economic indicator that the coronavirus is starting to take on a more global economic toll, with disruption to global shipping and trade potentially going beyond China. 80% of the world’s goods are transported by ship, and a pandemic would create significant disruption.

However, perhaps more importantly than the instantaneous loss of economic value of trade and tourism, is the realisation by global leaders of just how vulnerable their economies are to a predominantly Chinese supply chain.

A global pandemic would likely have a persistent and lengthy effect on the supply chain and trade out of China.

Risks are skewed to the downside, and the Cutcher & Neale Investment Services team elected to further strengthen our cash position both last week and overnight, positioning our overall cash position to the highest level since the GFC.

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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