Morning Market Update - 25 March 2020


Pre-Open Data

1

Key Data for the Week

Key economic data released this week:

  • Tuesday – EUR – Markit Manufacturing PMI fell 4.4 points to 44.8 for March.
  • Tuesday – US – Markit Manufacturing PMI fell 1.5 points to 49.2 for March.
  • Wednesday – UK – Consumer Price Index
  • Wednesday – UK – Producer Price Index
  • Wednesday – US – Durable Goods Orders

    2

Australian Market

The Australian sharemarket rallied 4.2% yesterday, with all sectors closing over 1.0% higher. Energy stocks led the gains as the price of oil rose to US$28 a barrel; Santos lifted 20.5%, Oil Search gained 9.0% and Woodside Petroleum added 5.6%.

The REITs sector was also a strong performer; Goodman Group climbed 12.0%, Stockland gained 10.8% and Dexus added 7.2%.

The Financials sector benefited from the big four banks; ANZ rallied 5.3%, Commonwealth Bank added 5.0%, NAB rose 3.7% and Westpac lifted 2.9%.

Waste management company Cleanaway rose 5.6%, despite announcing it had removed its forecasts and is anticipating a drop in demand in coming months, particularly from small and medium sized businesses.

Woolworths (WOW) fell 0.7%, after the company removed their guidance for FY20 because of shoppers’ unpredictable spending patterns. WOW has also decided to delay the planned demerger of its Endeavour Group Hotels business until next year.

The Australian futures market points to a 5.57% rise today, driven by stronger international markets.

Overseas Markets

European sharemarkets rose overnight, as the broad based Europe STOXX 600 added 8.4%. The Italian FTSE MIB lifted 8.9%, as the latest COVID-19 numbers showed a slowdown in new cases and raised hopes that the most aggressive phase of the outbreak may have passed. The Financials sector improved; ING Groep added 20.5%, Barclays lifted 13.8% and Lloyds rose 10.1%.

US sharemarkets closed higher overnight, with the Energy, Financials and Industrials sectors the strongest performers. Financial services companies MasterCard, PayPal and Visa rose between 13.8% and 16.6%. Technology stocks also rallied; Apple added 10.0%, Microsoft rose 9.1%, Facebook lifted 8.7% and Alphabet rose 7.4%

By the close of trade, the Dow Jones rose 11.4%, the S&P 500 added 9.4% and the NASDAQ lifted 8.1%.

CNIS Perspective

It may not be one of the most expansive consumer surveys ever conducted in Australia, but the Roy Morgan survey of 1,715 people over 21 March and 22 March has confirmed the magnitude of the virus on consumer confidence.

Consumer confidence experienced its biggest fall of 27.8% since 2008, which brings the index to just above the record low posted in 1990, and 17% lower than recorded during the GFC in October 2008.

There are two obvious areas that will suffer as a consequence – unemployment and GDP growth.

Already there are claims unemployment will skyrocket into double digit figures, and given consumer spending accounts for two thirds of GDP, it’s more than likely it will result in a negative GDP for the March quarter.

While the health of the community is obviously paramount in the government’s mind, in the background looms the possibility of two consecutive quarters of negative GDP, which defines a recession.

Australia hasn’t recorded a recession since the September quarter of 1990 and it’s something subsequent governments have prided themselves on for avoiding.

Given the current environment, it looks a tough assignment for the government to avoid a recession at the end of the second quarter of this year.

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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