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Morning Market Update - 5 September 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 rose 0.5% in the June quarter, and the annual growth rate slowed to 1.4%, from 1.7% in the March quarter, which is the slowest pace in 10 years.
  • Wednesday – EUR – Retail Sales fell 0.6% in July, in line with expectations.
  • Thursday – AUS – Trade Balance
  • Thursday – US – Initial Jobless Claims

S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket fell 0.3% yesterday, with the Health Care sector the weakest performer. CSL fell 1.5%, Cochlear lost 1.3% and ResMed slipped 0.7%.

The Financials sector weakened alongside the big four banks; ANZ fell 0.4%, Westpac lost 0.3%, Commonwealth Bank slipped 0.1% and NAB closed flat.

Telecommunications stocks were also a drag on the market; Telstra slipped 1.1% and TPG fell 1.3%.

The Materials sector outperformed the market, while mining stocks were mixed; BHP lost 0.3%, while Rio Tinto rose 0.3%, Fortescue Metals added 2.0% and Newcrest Mining gained 2.5%.

The Australian futures market points to a 0.29% rise today, being driven by stronger overseas markets.

Overseas Markets

European sharemarkets rose on Wednesday. Investors were encouraged by an easing of tensions in Hong Kong and positive Chinese economic data. The broad based STOXX Europe 600 rose 0.9% and the Italian FTSE MIB gained 1.6%, after the Prime Minister unveiled a new cabinet.

US sharemarkets also finished higher overnight, responding positively to news in Hong Kong, Italy and the UK. The Information Technology sector was the strongest performer; Alphabet and Microsoft gained 1.1% and 1.2% respectively, Apple added 1.7% and Facebook rose 2.6%. By the close of trade, the Dow Jones rose 0.9%, the S&P 500 added 1.1% and the NASDAQ lifted 1.3%.

CNIS Perspective

Behind the headline of Australia’s weakening GDP were other details of the economy that are sometimes overlooked.

The annual GDP growth rate of 1.4% is the slowest in 10 years, and way below the RBA’s target growth rate of 2.75%, where they see no excess capacity in the economy. We are therefore performing well under our potential.

The household savings rate and private demand are also poor numbers.

The household savings ratio fell to an 11 ½ year low of 2.3%, which suggests there is limited room for households to spend at a pace beyond the growth in their incomes.

It’s little wonder the demand within the economy is also soft.

Domestic private demand, which excludes trade, grew at its weakest annual pace in 4 ½ years and private demand, which excludes government, was at its softest rate in over a decade.

Weakness in consumer spending and the housing sector have resulted in the economy losing speed since the second half of last year.

The RBA will be hoping recent interest rate cuts and tax rebates spark some life back into the economy, and this data suggests further rate cuts are on the table.

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.


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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