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Morning Market Update - 8 March 2019

Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Thursday – AUS – Retail Sales eked out a 0.1% gain in January, above expectations for a 0.1% decline.
  • Thursday – EUR – Gross Domestic Product faltered further for Q4, with the annual level slipping to 1.1%, from 1.2%.
  • Friday – US – Unemployment Rate
  • Friday – CHINA – Consumer Price Index

S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket closed 0.3% higher yesterday, with all sectors improving, except for Materials and Information Technology. Mining heavyweights Rio Tinto, BHP Billiton and South32 all closed lower as they went ex-dividend.

The Telecommunications sector was the largest improver, as Telstra rose 1.6%. The Financials sector gained marginally, with NAB the best performer of the big four banks, after it appointed current Director and interim CEO Philip Chronican as its next Chairman. NAB shares lifted 0.8%. 

Retail sales continue to remain weak, however Myer managed to lift 2.2% yesterday. This followed Wednesday’s over 10% gain, which was triggered by the company’s reporting of better 1H19 results. 

The Australian futures market points to a 0.48% fall today, being driven by weaker international markets.

Overseas Market

European sharemarkets fell on Thursday. Reuters reported the "European Central Bank changed its interest rate guidance and announced a new round of cheap bank loans sooner than expected". The ECB is not expecting to raise rates until 2020. The broad based STOXX Europe 600 fell 0.4%, the UK FTSE lost 0.5% and Germany’s DAX slid 0.6%. 

US sharemarkets also closed lower yesterday. The interest rate decision in Europe weighed on investor sentiment, with the ECB downgrading economic growth forecasts. By the close of trade, the Dow Jones lowered 0.8%, the S&P 500 fell 0.9% and the NASDAQ lost 1.1%. 

Technology stocks were weaker; Intel lost 0.7%, Apple and Microsoft both fell 1.2%, while Facebook slid 2.0%. 

CNIS Perspective

The odds of the RBA cutting the Official Cash Rate (OCR) during 2019 are shortening after another week of lacklustre Australian economic data. 

At the RBA meeting on Tuesday, the OCR was left unchanged, although their dialogue regarding future interest rate intentions continues to sway away from higher rates, as previously intended. 

Subsequent to Tuesday’s meeting, a weak GDP number was released, and yesterday’s retail sales confirms the softness of the Australian economy.

January retail sales growth of 0.1% produced an annual pace of retail sales growth of just 2.7%, which is lower than the year to December, and well below the long term average of 3.7% annual growth, which confirms retailing is subdued. 

Weak wages growth, high levels of household debt and the slowdown in the housing sector are, as expected, weighing on consumer spending. 

Like the backflip the US Federal Reserve performed on benchmark US interest rates, it appears only a matter of time before the RBA does the same and actually cuts the OCR.

 Nominal Retail Sales (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 in the nature of general comment only, and neither purports, nor is intended to be advice on any particular matter.  Persons should not act or 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, ASX, Dow Jones, Australian Market, international markets

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