Morning Market Update - 26 June 2020


Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

  • Thursday – US – Gross Domestic Product for Q1 was unchanged at 1.6%.
  • Thursday – US – Initial Jobless Claims rose 1.48 million for the week ending 19 June.
S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket fell 2.5% yesterday, with all sectors closing lower, as investor focus was on the rising number of coronavirus cases and the risk of a delayed reopening to the global economy.

Energy stocks were amongst the weakest performers on the back of a sell-off in the price of oil Wednesday night; Woodside Petroleum fell 4.2%, while Santos and Oil Search lost 3.4% and 3.2% respectively.

Consumer Discretionary stocks were down, as travel stocks suffered heavy losses; Flight Centre slipped 11.0% and Webjet closed down 8.6%. Casino operators Star Entertainment Group and Crown Resorts weakened 6.4% and 4.7% respectively.

The Financials sector was dragged lower by the big four banks; Westpac and NAB both fell 3.5%, ANZ lost 3.1% and Commonwealth Bank slipped 2.3%. Investment manager Challenger slumped 7.0% and Macquarie Group dropped 3.6%.

Mining heavyweights BHP and Rio Tinto fell 2.4% and 1.6% respectively, while Fortescue Metals lost 2.6%. Goldminers also weakened; Northern Star slumped 4.2%, St Barbara closed down 3.6% and Saracen Mineral Holdings fell 3.2%.

The Health Care sector saw the smallest loses, helped by CSL which rose 0.6% 

The Australian futures market points to a 1.20% rise today, driven by stronger overseas markets.

Overseas Markets

European sharemarkets closed higher on Thursday,as more support from the European Central Bank helped lift sentiment. By the close of trade, the broad based STOXX Europe 600 closed up 0.7%. HelloFresh and Nestlé added 1.7% and 0.4% respectively, while Tesco slipped 0.4%. French Industrial companies Eiffage and Vinci added 2.1% and 1.1% respectively. UK real estate company Rightmove slipped 4.2% and building company CRH lost 1.4%.

US sharemarkets rose overnight, with all sectors except Utilities closing higher. The Financials sector was the strongest performer; Goldman Sachs gained 4.6%, Bank of America rose 3.8% and JPMorgan added 3.5%. Payment providers PayPal, MasterCard and Visa all rose between 1.3% and 2.7%. Technology stocks also posted gains; Apple, Microsoft and Alphabet all rose between 0.7% and 1.3%.

By the close of trade, the Dow Jones added 1.2%, while the S&P 500 and the NASDAQ both gained 1.1%.

CNIS Perspective

The CEO of Qantas, Alan Joyce, brought a dose of reality to the market yesterday. A month after saying the airline would not need to raise capital because it had enough liquidity to get through until the end of 2021, Joyce announced a $1.9 billion capital raising and 6,000 job cuts (in addition to the 15,000 workers currently furloughed).

Whilst it could be considered a smart move to wait until the share price had recovered to $4/share to raise funds and to cut further costs that might have needed to go, irrespective of COVID-19, it was the forward looking statements that raised concern as to any V-shaped economic recovery.

In the press conference Joyce said he expects Australia’s international borders to remain largely closed until July 2021. Even when borders reopen, the number of international flights in 2021/22 is expected to be just half of what they were before the coronavirus pandemic and only back to two-thirds the following financial year. The carrier’s entire fleet of 12 Airbus A380 superjumbos, which previously plied busy long-haul routes to Europe and the United States, will be grounded for at least three years.

As we move closer to the start of the reporting season, it is a timely reminder that the market will not only have to consider company’s financial performance, but more importantly, consider companies commentary for the future. Company forecasts as to how they will survive and/or thrive post-COVID will be a key determinant in market direction as we move into the second half of the 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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