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Morning Market Update - 29 October 2019


Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

    • Monday – US – Chicago Fed National Activity Index fell to -0.45 in September, from a revised 0.15 in August.
    • Monday – US – Goods Trade Balance – Exports fell 3% over the year in September to the lowest level in 18 months, while imports were down 4.6% to the lowest since 2017. The trade deficit narrowed slightly to US$70.4 billion.
    • Tuesday – US – Pending Home Sales
S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket extended its winning streak to six sessions yesterday, led by improvements in the Energy, Industrials and Materials sectors. Energy stocks were boosted by higher global oil prices, with the commodity last week recording its largest weekly gain in five weeks.

Iron ore miners posted solid gains to help lift Materials higher; Fortescue Metals strengthened 2.1%, BHP rose 1.1% and Rio Tinto climbed 0.5%. Lithium miners recorded strong sessions after indigenous demonstrators in Chile blocked access to a huge desert salt basin, home to two of the world's top lithium producers, amid nationwide protests over inequality.

Consumer Staples was the worst performing sector, dragged lower by Coles and Woolworths, which gave up 2.7% and 0.3% respectively, while Financials was weighed down by the big four banks, which closed mostly lower.

The Australian futures market points to a 0.34% rise today, driven by broadly stronger markets overnight.

Overseas Markets

European sharemarkets rose to their highest level since January 2018, led by automotive and resources stocks on hopes of a resolution to the US-China trade war. However, banks capped gains in the region, following a disappointing earnings result from HSBC, which ended the session 3.7% lower. The broad based STOXX Europe 600 rose 0.3% and the German DAX gained 0.4%, while the UK FTSE 100 rose just 0.1%, after the European Union granted the UK a three-month Brexit extension.

US sharemarkets also lifted overnight, with President Trump announcing the US is ahead of schedule to sign a partial trade deal with China. AT&T and Spotify ended the session 4.3% and 16.2% higher respectively, after both companies reported stronger-than-forecast profits. Microsoft hit a record high after the technology giant secured a US$10bn defence contract with the Pentagon for its cloud computing services, ending the session up 2.5%. Tiffany's gained 31.6% after the jeweller received a reported US$14.5bn takeover approach from LVMH, while Fitbit soared 30.9% on reports Alphabet has made a bid to acquire the company. By the close of trade, the Dow Jones rose 0.5% and the NASDAQ lifted 1.0%, while the S&P 500 added 0.6% to close at a new all-time high.

CNIS Perspective

Part of the reason the ‘r’ word has been bandied around a lot of late is due to the fact that we haven’t had one in such a long time, and statistically this isn’t normal. Australia has seen an unprecedented 27 years of economic growth since the 1991 recession, which Paul Keating stated was “the recession we had to have”.

If the current expansion continues in the US until January 2020, this will be the first decade a recession has not occurred since such records have been kept. Recessions are relatively common, occurring once or twice each decade. A recession is two consecutive quarters of negative economic growth, which neither Australia nor the US are even remotely close to.

Factors that usually cause a recession are high interest rates, reduced consumer confidence and reduced real wages. We are currently at record low interest rates, and wages growth, whilst sluggish, is still growing greater than inflation.

Recessions by Decade

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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