Morning Market Update - 27 March 2020

Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Thursday – UK – Retail Sales fell 0.3% for February to be flat on an annual basis.
  • Thursday – US – Initial Jobless Claims were 3,283,000 for the week ending March 21, well above expectations for 1,000,000.

    S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket rose for a third straight day, up 2.3% yesterday. All sectors closed higher, led by Information Technology, up 7.4%, as Afterpay rallied 29.4%. The stock has now doubled in value over the past three sessions.

Health Care also saw strong gains; CSL jumped 6.2% and Ramsay Health Care surged 15.3% after it announced it is in talks with government to assist with the Covid-19 response plan.

The big four banks were mostly higher, NAB added 2.2%, Westpac gained 1.1% and ANZ rose 0.8%, while Commonwealth Bank fell 1.0%.

The Materials sector improved slightly, as mining heavyweights were mixed; BHP fell 2.0% and Rio Tinto rose 5.1%.

There was another string of Covid-19 job losses; Virgin Australia gained 17.9% after it said redundancies would top 1,000, while Flight Centre remains in a trading halt after it announced it will stand down 6,000 workers. Premier Investments, owner of Jay Jays, Smiggle, Just Jeans and Peter Alexander, will also temporarily close stores worldwide, which will impact 9,000 staff. The company also stated it would not be paying rent to landlords; Vicinity Centres dropped 4.9% and Unibail-Rodamco-Westfield fell 8.9%.

The Australian futures market points to a 3.47% rise today, driven by stronger international markets.

Overseas Markets

European sharemarkets rose overnight, as the broad based STOXX Europe 600 gained 2.6%. Airbus climbed 21.4% after the company announced it was reducing the production of aircraft wings as it slows operations due to the pandemic. Tesco rose 5.7% and French construction company Eiffage, gained 9.5%.

US sharemarkets surged higher overnight, despite the worst jobless claims data on history. Investor sentiment was lifted as the US Senate passed a US$2 trillion stimulus package, the largest economic stimulus in US history. Information Technology stocks rallied; Microsoft lifted 6.3%, Alphabet added 5.4%, Apple rose 5.3% and Facebook gained 4.6%.

By the close of trade, the Dow Jones added 6.4%, the S&P 500 rose 6.2% and the NASDAQ gained 5.6%.

CNIS Perspective

If there was any doubt of the devastating impact on society from Covid-19, US data released overnight by the labour department offered the first nationwide picture of the damage.

Last week saw a record high 3.28 million Americans file a claim for unemployment benefits, up from just 282,000 the previous week. It is by far the largest single-week rise in unemployment claims since the department began publishing records in 1967. The previous one-week highs came in October of 1982, at 695,000 claims, and March 2009, at 665,000.

The claims data shows cost-cutting measures by companies at this time are having serious consequences, both for economic growth and the labour market. Hotels and restaurants have been hit particularly hard, as well as entertainment, transportation, manufacturing, and healthcare jobs.

The claims data only reflects people who were able to apply for an unemployment insurance benefit. Others may not qualify, had hours cut instead of getting laid off, or could not get into state systems when labour agency websites crashed. This is likely only the start, with economists predicting somewhere in the range of 15 million to 20 million job losses in coming weeks. 

US jobless claims at record levels

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.

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Topics: CNIS, Australian Market, ASX, international markets

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