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Morning Market Update - 8 August 2019


Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Wednesday – AUS – Housing Finance – The number of owner-occupier loans (excluding refinancing) rose for the first time in four months in June, lifting 0.4%. The value of investor loans also rose, climbing 0.6%, and was the first monthly increase in almost a year.
  • Thursday – CHINA – Trade Balance
S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket snapped a five-day losing streak to close 0.6% higher yesterday, led by REIT stocks. Gains were widespread, with Energy and Information Technology the only sectors to end the session lower.

The big four banks were mostly stronger; Westpac gained 1.1%, ANZ lifted 0.8% and NAB climbed 0.7%. However, Commonwealth Bank lost 1.4%, after announcing its annual cash profit was down 4.7% to $8.49 billion, following a $1.2 billion royal commission-related hit.

Energy stocks were the major weight on the market, as the price of crude oil dropped below US$60 a barrel on Tuesday night. The fall was attributed to ongoing US-China trade tensions and concerns over weakening global demand for the commodity. Woodside Petroleum slipped 0.4% and Santos gave up 0.8% in response.

The Australian futures market points to a 0.17% fall today.

Overseas Markets

European sharemarkets broke a three-day losing streak on Wednesday, as a multi-billion dollar German chemical deal boosted the local indices. Bayer jumped 6.0% after the company agreed with Lanxess to sell their integrated chemical firm Currenta to Macquarie Infrastructure and Real Asset for €3.5 billion (US$3.9 billion). The German DAX gained 0.7%, the UK FTSE 100 climbed 0.4% and the broad based STOXX Europe 600 rose 0.2%.

US sharemarkets closed mostly higher on Wednesday, recovering from steep early losses, amid earlier recession fears in response to lower bond yields. Financials stocks were the biggest drag on the markets as a result, while the Energy sector weakened in response to a slump in global oil prices. By the close of trade, the Dow Jones gave up 0.1%, however, the S&P 500 and NASDAQ gained 0.1% and 0.4% respectively.

The Walt Disney Company was the biggest decliner on the Dow Jones overnight, ending the session 5.0% lower after reporting third quarter profit and revenue that missed expectations. Earnings fell 28%, to US$1.35/share, while revenue rose 33%, to US$20.3 billion. Analysts had expected earnings of $1.75/share and revenue of US$21.5 billion. The company stated the results were weighed down by the integration of 21st Century Fox into the business, following their recent merger, as well as higher streaming costs associated with their new Disney+ service.

CNIS Perspective

It’s being called the “race to the bottom” as central banks around the world lower benchmark interest rates in an attempt to weaken currencies, strengthen wages and encourage inflation.

So far Denmark is leading the race, yesterday announcing a 40-year mortgage at 0% interest rate.

Given the lack of success zero or negative interest rates have had in the past, the move seems a little surprising.

Japan for example, have had negative interest rates for over 20 years, with little impact on strengthening their economy.

It’s unlikely Australia will follow suit in such an aggressive manner.

The RBA has previously stated they won’t go that low. However, with the Australian benchmark rate at 1%, it’s not that far off!

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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