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Morning Market Update - 26 June 2018

Pre-Open Data

International Markets versus Australian Market

Key Data for the Week

Key economic data released this week:

  • Monday – US – New Home Sales rose 6.7% in May, to an annual rate of 689,000 units, following a fall of 3.7% in April.
  • Tuesday – US – S&P/Case-Shiller Home Price Indices

Australian Market

S&P ASX 200 Last 12 Months

The Australian sharemarket ended the first trading session of the week 0.2% lower, as weakness amongst Financials stocks offset gains in the Energy sector, following last week’s OPEC meeting.

APA Group (APA) announced a landmark agreement with Incitec Pivot (IPL) to start commercial operations of the Northern Gas Pipeline, delivering gas from southern Northern Territory to IPL’s fertiliser plant in Qld. APA closed up 0.2%, while IPL lost 2.0%.

Commonwealth Bank (CBA) announced its intention to demerge its wealth management and mortgage broking businesses. The demerger will provide investors with a direct investment in a leading independent wealth management company. CBA shares fell 2.3%, to $72.16.

Metcash (MTS) reported FY18 results with sales up 4.3%, to $14.5bn, whilst EBIT was up 9.2%, to $332.7m, driven by growth in hardware earnings. A $125m off market buyback was announced, along with a final dividend of $0.07 per share fully franked. MTS closed 3.3% higher, at $2.79.  

The Australian futures market points to a 0.92% fall today, led by weaker international markets overnight.

Overseas Market 

European sharemarkets fell on Monday, dragged down by ongoing concern regarding trade tensions between the US and China, as well as the widening belief that this could limit world economic growth. The broad based STOXX Europe 600 fell 2.0%, the German DAX gave up 2.5% and the UK FTSE 100 lost 2.2%.

US sharemarkets also fell on Monday, weighed down by Technology stocks, on the possibility of investment restrictions being placed on the sector. The report released stated the US could bar many Chinese companies from investing in US Technology firms, as well as placing a restriction on US Technology exports. However, losses were trimmed in the last 30 minutes of trade after White House trade adviser Peter Navarro denied the investment restrictions were imminent. The Dow Jones closed 1.3% lower, while the S&P 500 fell 1.4% and the NASDAQ slid 2.1%.

CNIS Perspective 

With the tariffs and a potential trade war back on the agenda, it’s easy to get distracted from some more fundamental and influential economic data.

One important economic indicator on our radar is the US yield curve, or graph of US interest rates, into the future.

Of concern is an inverse yield curve, where the longer dated interest rates fall lower than shorter dated rates.

The gap between the 2 year and 10 year rates is therefore monitored closely and currently it is at its flattest since August 2007.

This means the yield curve is tilted in the direction of becoming inverse, which has a very strong record of indicating recessionary times.

US Yield Curve

Contact Us

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Disclaimer

The material contained in this publication is in the nature of general comment only, and neither purports, nor is intended to be advice on any particular matter.  Persons should not act or 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, Dow Jones, Australian Market, ASX, Internation Markets

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