Morning Market Update - 29 June 2020


Pre-Open Data

1

Key Data for the Week

  •  Monday – EUR – Consumer Confidence
  •  Monday – US – Pending Home Sales
  •  Tuesday – EUR – Consumer Price Index
  •  Tuesday – UK – Gross Domestic Product
  •  Wednesday – AUS – Building Permits
  •  Wednesday – US – ISM Manufacturing PMI
  •  Thursday – AUS – Trade Balance
  •  Thursday – US – Unemployment Rate
  •  Friday – AUS – Retail Sales

2

Australian Market

The Australian sharemarket rebounded on Friday following the previous session’s heavy sell-off, closing up 1.5%, as sentiment improved after the US eased some regulations for larger American banks. Gains were largely broad based, with Health Care the only sector to close lower.

The big four banks pushed the Financials sector higher; Westpac gained 3.3%, ANZ lifted 3.0%, NAB strengthened 2.7% and Commonwealth Bank added 2.4%. Mining heavyweights BHP and Rio Tinto climbed 2.9% and 2.0% respectively, while Telstra boosted Telecommunications stocks, ending the session up 0.6%.

Qantas plummeted 9.0%, after the airliner resumed trading following its $1.4 billion equity raising from institutional investors, with a further $500 million to be raised from retail investors. Competitor Virgin Australia is set to be sold to Bain Capital, after the other remaining bidder, Cyrus Capital, dropped out of discussions, citing lack of engagement from Virgin Australia administrators since its bid was submitted.

The Australian futures market points to a 1.58% fall today, driven by weaker global markets on Friday.

Overseas Markets

European sharemarkets closed mostly lower on Friday, as gains earlier in the session were eroded by more reports of the rising number of coronavirus cases in the US. European Central Bank President Christine Lagarde stated that although the euro zone is “probably past” the worst of the coronavirus pandemic, the economic recovery process will be "restrained". Tesco gained 1.9%, after Britain’s largest retailer reported an 8.7% increase in UK sales during the first quarter, boosted by the COVID-19 lockdown. The STOXX Europe 600 slipped 0.4% and the German DAX slid 0.7%, while the UK FTSE 100 rose 0.2%.

US sharemarkets posted solid losses on Friday, with states heavily affected by growing number of coronavirus cases forced to back track on the easing of their restrictions. Bank stocks weighed on the broader market after the US Federal Reserve capped dividends and banned buybacks until September, while reports the 'Phase 1' US-China trade deal could be at risk also weakened sentiment. Facebook slid 8.3% after more global businesses announced they were boycotting advertising on the company’s social media network. By the close of trade, the Dow Jones lost 2.8%, the NASDAQ fell 2.6% and the S&P 500 gave up 2.4%.

CNIS Perspective

With cases spiking around the world and panic buying returning, it’s interesting to note the relatively steady level of the Volatility (VIX) or fear index.

From the beginning of the coronavirus outbreak in early March, the VIX has consistently traded at an elevated or fearful level.

It’s generally considered that when above 20, the market is a high chance of falling.

During most of the post-GFC years, the VIX rarely touched 20. However, since March, the VIX has consistently hovered around 30 and well above 20.

At the moment, the extraordinary level of uncertainty in the market suggests it will be some time before we see the VIX anywhere near 20, let alone 10 to 15, where it has spent most of its time in recent years.

3

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

Recent Posts

Blog Tags

see all