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Morning Market Update - 7 August 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 official cash rate unchanged at 1.0%, as widely expected.
  • Tuesday – AUS – Trade Balance – Trade surplus surged in June to $8bn, the largest surplus on record.
  • Wednesday – AUS – Housing Finance
  • Wednesday – US – Consumer Credit
S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket fell 2.4% yesterday, with all sectors closing lower. The Information Technology sector was the worst performer, closely followed by Health Care and REITs. WiseTech Global fell 8.0%, Xero slipped 6.0% and Afterpay Touch lost 4.9%, while CSL and Cochlear lowered 4.0% and 3.2% respectively.

The big four banks dragged the Financials sector lower; Commonwealth Bank fell 1.7%, ANZ and NAB lowered 2.2% and 2.3% respectively, while Westpac slipped 2.6% to lead the declines.

Retailers Harvey Norman, JB Hi-Fi and Myer all fell between 2.6% and 2.9% ahead of earnings season, as talk of a retail sector recession has fueled concerns over company outlooks.

The miners were mixed; Fortescue Metals rose 2.8%, while BHP and Rio Tinto fell 0.8% and 0.1% respectively.

The Australian futures market points to a 0.73% rise today.

Overseas Markets

European sharemarkets fell on Tuesday, as investors watched for developments in the US-China trade war. German industrial orders rose 2.5% in June, the strongest gain since August 2017. Despite the positive news, the broad based STOXX Europe 600 fell 0.5%.

US sharemarkets rose overnight, with all sectors up except for Energy. There was an easing of tensions on Tuesday after China's central bank moved to stabilise its currency, fixing the yuan at a slightly stronger level against the US dollar. Information Technology stocks rebounded from some of the previous session’s losses; Microsoft and Apple both rose 1.9%, while Facebook and Alphabet added 1.5% and 1.4% respectively.

Genetic engineering company, InVitae, rose over 18% in after hours trade after reporting Q2 revenue of US$53.5m, with gross profit of US$25.5m. The company said they “are confident in our ability to achieve our 2019 guidance".

CNIS Perspective

The RBA hit the pause button yesterday and left the Official Cash Rate (OCR) unchanged after consecutive cuts in June and July.

For how long this remains the case is another matter.

With China and the US actively integrating currency devaluation into their trade war tactics, Australia has little choice but to join in.

While the RBA continue to cite lower unemployment as one of their primary goals, the competitiveness of our exports must also be a major concern, particularly if the US-China trade war morphs into a significant global economic slowdown, or something worse.

The AUD/USD is at a ten year low, and will go lower if the OCR is cut further, particularly given our weak economic growth generally.

Trump is openly criticising China as “currency manipulators”, but they are playing the same game as the US and Australia has little choice but to play it also.

AUD/USD Last 10 Years

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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