Morning Market Update - 9 August 2019

Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Thursday – CHINA – Trade Balance – Exports rose 3.3% in July from a year ago, while imports fell 5.6% over the same period. Consensus expectations had been for a 2.0% fall in exports and an 8.3% decline in imports.
  • Friday – AUS – RBA Statement on Monetary Policy
  • Friday – UK – Gross Domestic Product
S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket rose for a second straight session yesterday to close 0.7% higher. Gains were again widespread across the market, with Consumer Staples and Utilities the only sectors to close lower. Telecommunications was the best performing sector, buoyed by Telstra, which climbed 2.3%.

AGL Energy fell 4.6% following a downgrade to its underlying profit forecast for FY20, with the energy producer expecting a ~14% decline for the year, impacted by an unplanned outage of its Loy Yang Plant in Victoria.

IAG gave up 5.0% after announcing its insurance profit dropped 13.0% in FY19. The result was impacted by higher claims from natural disasters, such as the December 2018 hail storm in Sydney, along with lower returns on fixed interest investments.

The Australian futures market points to a 0.6% rise today, being driven by broadly stronger overseas markets.

Overseas Markets

European sharemarkets enjoyed their best session in almost two months on Thursday, boosted by upbeat Chinese trade data and the decision by the Chinese government to set a stronger than expected fixed rate for their yuan. All major indices in the region ended the session higher, with the broad based STOXX Europe 600, France’s CAC 40, Germany’s DAX, Italy’s FTSE MIB and the UK’s FTSE 100 all posting solid gains of over 1.0%.

US sharemarkets also closed higher overnight. Technology stocks led the gains; sector heavyweights Facebook and Microsoft both rose 2.7%, Alphabet climbed 2.6%, while Amazon and Apple both gained 2.2%. Financial services companies MasterCard and Visa also posted strong gains, ending the session 3.2% and 2.6% higher respectively. By the close of trade, the Dow Jones closed 1.4% higher, the S&P 500 gained 1.9% and the NASDAQ lifted 2.2%.

CNIS Perspective

Unlike most developed countries, who have a floating exchange rate, the ability for the Chinese to set their own currency rate gives China a powerful tool to protect their economy against external forces.

China's currency fix is published every day after a group of 14 lenders submit their rates, and the yuan is then allowed to move 2% in either direction.

A significant move this week, to depreciate the yuan, has caught global attention. The People's Bank of China set the daily reference rate above 7.0/US Dollar, for the first time since 2008.

A weaker currency will go part way to offsetting the impact of higher tariffs on Chinese goods, but a significant further weakening from here could cause greater instability and a flurry of investors exiting the yuan, something Chinese officials have sought to avoid.

In addition, the weaker the yuan is set, the more likely it is the Trump Government will impose more tariffs.

Yuan per dollar

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.

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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