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Morning Market Update - 6 November 2019


Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

    • Tuesday – AUS – RBA Interest Rate Decision – The RBA left the cash rate on hold, as widely expected. The hold decision follows rate cuts of 25 basis points at each of the June, July and October meetings.
    • Wednesday – EUR – Retail Sales
S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket closed higher for a 10th session in 12 days yesterday, ending up 0.15%, led by gains in the Energy sector.

Westpac continued to weigh on the Financials sector following its disappointing earnings results released on Monday, ending the session 2.6% lower. The other major banks posted gains; Commonwealth Bank climbed 0.8%, NAB lifted 0.6% and ANZ added 0.4%.

Goldminers were under pressure as the price of the precious metal fell, as Evolution Mining, Newcrest, Northern Star and Saracen Minerals all closed down between 2.0% - 3.4%.

Lithium stocks gave up some of their recent gains from the instability in Chile, with Pilbara Minerals dropping 7.9% and Galaxy Resources falling 4.7%. Diversified miners performed better, with BHP and Rio Tinto both closing up 1.3%, while Fortescue Metals gained 1.6%.

The Australian futures market points to a 0.28% rise today.

Overseas Markets

European sharemarkets rose on Tuesday to hit more than four-year highs, in response to a rally in commodity prices and sectors dependent on global economic activity. Defensive sectors like Utilities, REITs and Health Care all closed lower. The STOXX Europe 600 rose 0.2% to close at its highest level since July 2015, while the German DAX climbed 0.1% and the UK FTSE 100 added 0.3%.

US sharemarkets were mixed overnight, showing resilience after hitting all-time highs in recent days. Gains were led by the Energy sector, while banks and grocers led Financials and Consumer Staples higher respectively. REITs and Utilities were the major laggards, while the Health Care sector was weighed down by disappointing earnings results from Becton Dickinson (-5.4%) and Myriad Genetics (-40.4%). Uber fell 9.9%, despite beating Q3 revenue, EPS and EBITDA market estimates, with increased competition for Uber Eats and share loss in rides among the concerns. By the close of trade, the Dow Jones gained 0.11% and the NASDAQ lifted 0.02%, while the broader S&P 500 slipped 0.12%.

CNIS Perspective

Lebanon may not be considered an economic powerhouse, but the downgrading of their credit rating by Moody’s last night, illustrates the effect a downgrade can have on bond prices.

Lebanon’s credit rating was cut one notch further into ‘junk’ territory, reflecting the increased likelihood of debt default, and remains on negative watch.

Lebanese government bonds have collapsed by 18% this year, with their 2027 bonds falling nearly 5% last night.

While there may only be a minimal knock-on effect from this particular credit downgrading, it does illustrate the effect a downgrade can have on bond prices and the bond market generally.

As we have highlighted recently, there has been significant growth in BBB rated US corporate debt.

The risk to the bond market is a downgrade here, given the volume and breadth of this debt and the widespread knock-on effect it would have.

Price of Lebanese Bond Maturing in 2027

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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