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Morning Market Update - 26 March 2018

Pre-Open Data

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Key Data for the Week

Key economic data released this week:

  • Monday – US – Chicago Fed National Activity Index
  • Tuesday – AUS – HIA New Home Sales
  • Tuesday – EUR – Consumer Confidence
  • Wednesday – AUS – ANZ Business Confidence
  • Wednesday – US – Gross Domestic Product
  • Thursday – GBP – Gross Domestic Product
  • Thursday – US – Initial Jobless Claims
  • Friday – UK – Consumer Confidence

Australian Market

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The Australian sharemarket closed 1.96% lower on Friday, as negative sentiment weighed on local stocks, following US President Trump’s decision to impose a 25% tariff on up to US$60bn in various Chinese imports. In response, China has unveiled plans to impose 15-25% tariffs on up to US$3bn in various US imports. The announcements weighed on all sectors, with Materials and Financials the weakest.

Transurban Group (TCL) will acquire a 100% equity interest in the A25 toll road in Montreal, Canada from Macquarie Infrastructure Partners, for CA$840m (AU$861m) plus acquisition costs. The acquisition represents an FY17 EV/EBITDA multiple of 26x. The deal will be funded by TCL’s balance sheet, with no new debt or equity issuance required, and is expected to be completed in June 2018, subject to approval from Canadian authorities. TCL declined $0.12, to close 1.1% lower, at $11.05.

The Australian futures market points to a 0.89% fall today, following weaker overseas markets on Friday.

Overseas Market 

European sharemarkets fell on Friday, led by basic resources and automotive stocks, as the potential of a US-China trade war continues to weigh on those companies. The STOXX Europe 600 fell 0.9%, to 13-month lows, the German DAX gave up 1.8% and the UK FTSE 100 eased 0.4%, to fresh 15-month lows.

Similarly, the continued uncertainty about the prospect of a trade war between the US and China, along with the impact higher borrowing rates will have for global growth, weighed on US sharemarkets on Friday. The Dow Jones fell to 4-month lows, down 1.8%, while the S&P 500 lost 2.1% and the NASDAQ slid 2.4%. However, global oil prices surged, as speculation intensified that sanctions on Iran will be re-imposed.

CNIS Perspective 

The potential trade war that is brewing is another one of those factors, along with more instability in the ranks of the Trump administration, that arises to cause short term sharemarket volatility.

In the long run however, sharemarkets reflect the underlying growth of the economy. The graph below, that compares the S&P 500 to US GDP since 1960, illustrates this.

Currently, US economic growth is clicking over at a satisfactory rate, and the full extent of personal and corporate tax cuts still haven’t fully kicked in yet.

There will always be factors that arise to cause short term sell-offs, but fundamental economic growth is still the long term driver.

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Contact Us

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


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: Investment, CNIS, Trump, GDP, Sharemarkets

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