Morning Market Update - 20 March 2020


Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Thursday – AUS – Unemployment Rate fell 0.2% to 5.1%, fully recovering from the 0.2% rise in January.
  • Friday – US – Existing Home Sales

    S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket was down 3.4% yesterday. REITs was the worst performer; Stockland dropped 24.9%, Mirvac slipped 18.0% and Goodman Group fell 14.6%.

The big four banks all fell between 4.7% and 9.8%, with ANZ the weakest performer.

The Energy sector also suffered as the price of Brent crude fell to just US$25 a barrel. Oil Search dropped 16.8%, Santos lost 12.1%, Woodside Petroleum slipped 7.6%.

Consumer stocks outperformed; Wesfarmers added 2.0%, Coles rose 1.7% and Woolworths gained 0.8%. Freedom Foods Group was a market outperformer, up 11.1%, due to a spike in panic buying from shoppers, specifically in its long-life milk.

Mining heavyweights bucked the trend; BHP and Rio Tinto gained 0.7% and 0.8% respectively, while Fortescue Metals gained 5.8%. Gold miners underperformed; Newcrest, Evolution and Northern Star were all down between 7.4% and 11.7% as the price of the precious metal dropped.

Health Care stocks rose; CSL added 4.6%, Ramsay rose 0.7% and Cochlear eked out a 0.4% gain.

The Australian futures market points to a 2.4% rise today, driven by stronger international markets.

Overseas Markets

European sharemarkets rose on Thursday, as the broad based STOXX Europe 600 lifted 2.9%. French industrial companies, Vinci and Eiffage lifted 9.9% and 6.1% respectively. Nestlé continued to rally, up 5.9%. The Financials sector was mixed; ING Groep added 3.9% and Barclays PLC lifted 0.7%, while Lloyds Banking Group fell 3.8%.

US sharemarkets closed higher overnight, as further monetary and fiscal stimulus eased investor anxiety. The Energy sector was the strongest performer, while Utilities underperformed. Technology stocks were mostly higher; Facebook added 4.2%, Alphabet and Microsoft both lifted 1.7%, however, Apple lost 0.8%. The Financials sector was stronger; Goldman Sachs lifted 6.8%, Bank of America rose 2.0% and JP Morgan added 1.7%. Visa and Paypal rose 2.5% and 2.4% respectively, Square added 1.3%, however, MasterCard fell 0.3%.

By the close of trade, the NASDAQ lifted 2.3%, the Dow Jones rose 1.0% and the S&P 500 added 0.5%.

CNIS Perspective

Yesterday, the Reserve Bank of Australia came out swinging against the impact of Covid-19, with key measures and strong language promising to do "whatever it takes.... with nothing off the table" to help the economy.

In the emergency meeting, the RBA cut interest rates a further 0.25%, to a new record low of 0.25% and said it is “quite likely” the cash rate could be at this level for “three years”. This type of long term forward guidance by the RBA is highly unusual and a strategy to ease borrowers anxiety, knowing the RBA is doing what it can, until the economy has pulled through this event.

In addition, the RBA announced it will provide funding for banks to access cheaper credit in order to support small and medium-sized businesses, which are no doubt going to find the coming months very difficult, as demand for many goods and services dries up.

It is unlikely that even in the short term the latest stimulus package will put an end to volatility in financial markets and uncertainty in the economy, with only a flattening in the daily rate of new global infections, or a vaccine likely to be able to achieve such reprieve. 

However, Australia is in a fortunate position to have a robust economy, a very good economic balance sheet, and ability to deliver adequate stimulus to do what’s needed.

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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