Morning Market Update - 7 November 2019

Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

    • Wednesday – EUR – Retail Sales edged 0.1% higher for September, in line with expectations. The annual rate rose to 3.1% from 2.7%.
    • Thursday – UK – BoE Interest Rate Decision
S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket fell 0.6% yesterday, with all sectors closing lower except for Materials and Energy.  Rio Tinto and South32 rose 1.5% and 2.7% respectively, while Boral fell 3.7%, after announcing a construction slowdown lowered their earnings.

The Industrials sector was the weakest performer, down 1.8%. Sydney Airport dropped 2.9%, Transurban slipped 2.3% and Virgin Australia lost 1.6% after the carrier said it was retiring five ageing aircraft and reducing routes in a bid to return to profitability.

Medibank Private dropped 8.5%, after warning claims had risen faster than expected and it anticipates the trend to continue. NIB fell 2.2% after it announced it was also experiencing claims inflation, with customers using a new mental health waiver to upgrade their cover and immediately access in-hospital mental health services.

The big four banks were mixed, with the Financials sector closing lower. Commonwealth Bank and Westpac rose 0.4% and 0.3% respectively, while ANZ and NAB both fell 0.2%.

The Australian futures market points to a 0.42% rise today, being driven by stronger overseas markets.

Overseas Markets

European sharemarkets rose on Wednesday. German sports retailer Adidas fell 5.4%, with net profit down 3.3% despite a 10% rise in sales in North America.  The broad based STOXX Europe 600 rose 0.2%, the German DAX also added 0.2% and the UK FTSE 100 gained 0.1%.

US sharemarkets were mixed overnight, with reports the US-China trade deal may not be signed until next month and that the summit may take place outside of the US. The Energy sector was the weakest performer, while Health Care stocks had the largest gains. By the close of trade, the S&P 500 rose 0.1%, the Dow Jones closed flat, while the NASDAQ fell 0.3%.

CNIS Perspective

Looking at the graph below, we can see a recent divergence of two closely watched early indicators of the US economy, by way of the performance of the manufacturing sector. The recent uptick in the Markit Purchasing Managers Index (PMI) above 50 suggests the health of the US manufacturing sector is improving, whilst the ISM PMI data being below 50 indicates the economy is contracting.

This manufacturing data is collected from executives of national US industrial companies comparing production, new orders, inventories, employment etc. for the current month to the previous months data.

The key difference between the 2 indicators is the ISM data focuses on larger multinationals, whereas Markit polls a mix of more domestic focused companies.

This goes some way to explaining the current differential between the two, as ISM is signalling a global manufacturing slowdown, while Markit is suggesting the US manufacturing sector continues to be much more resilient, in line with strong employment data.

US Manufacturing PMI

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


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.

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Topics: CNIS, Australian Market, ASX, international markets

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