Morning Market Update - 5 December 2019

Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

    • Wednesday – AUS – Gross Domestic Product growth in the September quarter expanded 0.4%, the slowest quarterly pace in three quarters and below market expectations. Annual growth was 1.7% in the September quarter, only marginally higher than the revised 1.6% outcome for the June quarter.
    • Wednesday – US – Markit Services PMI
    • Thursday – AUS – Retail Sales
    • Thursday – EUR – Gross Domestic Product

S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket slumped for a second consecutive session yesterday, following comments made by President Trump on Tuesday night where he raised the possibility of delaying a trade deal with China until after the next presidential election in 2020. Consumer Staples was the weakest performer; Coles fell 2.9%, Coca-Cola Amatil dropped 2.7% and Woolworths gave up 1.9%.

Health Care was the only sector not to close at least 1.0% lower, propped up by CSL, which only gave up 0.3%. The big four banks all slid between 1.0% - 2.1% to weigh on the Financials sector, while mining heavyweights BHP and Rio Tinto lost 2.5% and 2.1% respectively. Goldminers were mixed; Newcrest Mining rose 1.1% and St Barbara gained 1.2%, while Evolution Mining lost 3.7% and Saracen Mineral slipped 1.7%.

The Australian futures market points to a 0.84% rise today, driven by broadly stronger markets overnight.

Overseas Markets

European sharemarkets rebounded on Wednesday following a four-day slump. Gains were led by the Financials and Industrials sectors, while trade sensitive stocks were boosted by a Bloomberg report which stated the US and China were close to agreeing on the amount of tariffs that would be rolled back in their phase one trade deal. The broad based STOXX Europe 600 and the German DAX both gained 1.2% and the UK FTSE 100 added 0.4%.  

US sharemarkets also closed higher overnight, led by Energy stocks, following a rise in global oil prices. MasterCard slipped 0.1% after announcing it will implement a new US$8 billion share buyback program, once the remaining US$300 million repurchase of its current US$6.5 billion buyback has been completed. The payments company also increased its quarterly dividend by 21% to US$0.40/share. Technology heavyweights Alphabet (2.0%), Apple (0.9%) and Microsoft (0.4%) all posted solid gains. By the close of trade, the Dow Jones and NASDAQ both climbed 0.5% and the S&P 500 lifted 0.6%.

CNIS Perspective

Australia’s GDP number released yesterday was surprisingly weak given the significant turnaround in trade data announced the day before.

Once again the major source of disappointment came from household consumption, which grew just 0.1% in the September quarter. It is the weakest quarterly rate since the December quarter of 2008.

Consumers remain cautious and reluctant to spend, with the household savings rate of 4.8%, being the highest level since the first quarter of 2017.

Discretionary spending was the hardest hit. Spending on hotels, cafés and restaurants, clothing and footwear and new motor vehicles fell the most in the September quarter.

The graph illustrates the decline in GDP, which has been languishing since the middle of last year.

Three rate cuts by the RBA this year and the addition of government tax rebates have obviously failed to revive consumer spending, which is critical to GDP growth.

Net exports and government spending remain the major drivers of Australia’s economic growth.

Australian Gross Domestic Product (Annual % Change)

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


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Topics: CNIS, Australian Market, ASX, international markets

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