Morning Market Update - 26 February 2020

Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Tuesday – US – Consumer Confidence rose 0.3% for February to 130.7, however, below expectations for 132.
  • Wednesday – AUS – Construction Work Done
  • Wednesday – US – New Home Sales

    S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket fell 1.6% yesterday, with all sectors closing lower. The Consumer Discretionary, Energy, Materials and Telecommunications sectors were the worst performers, all closing down over 2%.

Woodside Petroleum dropped 2.2% and Oil Search dipped 2.3% after announcing its full-year profit was down 8.4%, while Santos declined 3.0% after it went ex-dividend.

Mining heavyweights BHP and Rio Tinto fell 2.1% and 1.7% respectively, while goldminers were down as the price of the precious metal retreated from Monday's seven-year highs; Newcrest, Evolution, Northern Star and Ramelius Resources were all down between 3.1% and 3.6%, while Saracen Mineral dropped 7.3% and St Barbara slumped 9.7%.

The Financials sector was weighed down by the big four banks; Westpac was the weakest performer, down 1.7%, Commonwealth Bank gave up 1.4%, NAB fell 1.1% and ANZ slipped 0.7%.

Treasury Wine Estates declined 4.0% after announcing it would not be able to meet its full-year guidance due to the coronavirus.

The Australian futures market points to a 1.6% fall today, driven by weaker international markets.

Overseas Markets

European sharemarkets closed lower on Tuesday, with the broad based STOXX Europe 600 down 1.8%. Financials companies were all lower; Lloyds slipped 2.1%, Deutsche Bank fell 2.2%, Barclays PLC lost 2.5% and ING Groep dropped 3.5%. Airline companies continued their declines; Lufthansa lost 1.6%, easyJet fell 3.0% and Air France was down 3.3%.

US sharemarkets fell sharply overnight, with all sectors lower. The Energy sector was the worst performer, with the price of crude oil down nearly 7% on a week ago. MasterCard dropped 6.7%; the company expects net revenue growth to be lower than previously announced. PayPal and Visa also fell 5.8% and 5.2% respectively. Biotechnology company Moderna rose 27.8%, after the company delivered the first batch of its potential coronavirus vaccine to US government researchers for human clinical trial to begin in late April. Results on safety and immune response are expected in July or August; the three month development period would be much faster than the 20 month period for the SARS vaccine.

By the close of trade, the NASDAQ fell 2.8%, the S&P 500 lost 3.0% and the Dow Jones dropped 3.2%.

CNIS Perspective

Equity markets continue to tumble on the back of the coronavirus outbreak.

A couple of things are interesting to note:

The traditional flight to the safety of US bonds has seen prices surge even higher and yield drop to record lows. When equity prices are surging to record highs, there is widespread conjecture as to whether they can continue to rise, but not so with bonds.

For how much further can this bond market rise before we see a correction?

Normally when an economy is struggling, attention turns to the central bank to implement monetary policy to stimulate it. This is not the case now, as adding liquidity through lower interest rates will not have any impact on the disruption to the supply chain caused by the virus.

There appears to be no light at the end of the tunnel until a vaccine for the virus is prescribed. Even then, it will take some time for supply chains, airlines, tourism, shipping, manufacturing, retail etc. to return to pre-virus conditions.

Should you wish to discuss this or any other investment related matter, please contact your Investment Services Team on (02) 4928 8500.


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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