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Morning Market Update - 31 January 2019

Pre-Open Data

 International market vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Wednesday – AUS – Consumer Price Index rose 0.5% in the December quarter, slightly above expectations. The annual rate of inflation eased from 1.9% to 1.8%, well below the RBA’s 2-3% target band.
  • Wednesday – US – Federal Reserve Interest Rate Decision – Interest rates remained unchanged at 2.25% - 2.50%.
  • Thursday – EUR – Gross Domestic Product
  • Thursday – EUR – Unemployment Rate

S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket rose 0.2% yesterday, led by the Materials sector. Commodity prices advanced in response to comments from US Treasury Secretary Steven Mnuchin, who suggested the prospect of a truce in the trade war with China. Mining heavyweights Rio Tinto and BHP gained 4.5% and 2.6% respectively.

The Financials weighed on the market, with the big four banks all lower. ANZ led the losses down 0.4%. The banks were barred from reading the Royal Commission final report until it is publicly released after the market close on Monday, amid concerns over possible trading of insider information. 

The Australian futures market points to a 0.31% rise today, being driven by strong overseas markets. 

Overseas Market 

European sharemarkets were mixed on Wednesday. Luxury goods retailers rose following a positive earnings report from Moët Hennessy Louis Vuitton which rose 6.9%. The broad based STOXX Europe 600 rose 0.4% and the UK FTSE 100 lifted 1.6%, while the German DAX lost 0.3%. 

US sharemarkets were strong overnight in response to positive earnings reports and the Federal Reserve interest rate decision. The S&P 500 lifted 1.6%, the Dow Jones rose 1.8% and the NASDAQ climbed 2.2%. 

Shares in Boeing rose 6.3% on positive full-year profit guidance, with commercial airplanes revenues up 12% to $17.31bn.  Apple rose 6.8% after reporting solid services revenues, up 19% year on year, total revenue reported for the quarter was $84.31bn. eBay rose in after hours trade, up 1.16% after reporting in line revenues for Q4. 

CNIS Perspective 

Yesterday’s release of Australian economic data confirms inflation continues to be subdued. 

The annual pace of inflation held at 1.8% and remains below the RBA’s 2-3% per annum target band.

The low inflation environment is reflective of conditions in the labour market and retail sector. Wages growth is low and, although the unemployment rate has declined over the past year, there remains spare capacity within the labour market. 

Inflation looks set to remain under the target band for some time and be a factor that keeps the RBA on the sidelines, as far as interest rate hikes are concerned.

Unless there is a dramatic change in economic conditions to encourage inflation, there seems more case for a rate reduction by the RBA, than a rate hike. 

Only time will tell.

Consumer Price Index (annual % change)

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 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: CNIS, ASX, Dow Jones, Australian Market, international markets

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