Morning Market Update - 16 July 2021

15 July 2021
3 minute read

Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

  • Thursday – AUS – Unemployment Rate fell to 4.9% in June, down from 5.1% in May.
  • Thursday – UK – Unemployment Rate rose to 4.8% in the three months to May.
  • Friday – EUR – Trade Balance
  • Friday – US – Retail Sales
S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket eased 0.3% yesterday, as all sectors except Materials and Utilities closed lower.

Travel and leisure stocks remain under pressure as the NSW COVID-19 outbreak continued, with an additional 65 locally acquired cases reported yesterday, while it was announced Victoria will enter a five-day snap lockdown. Corporate Travel Management shed 3.3%, Flight Centre fell 2.6% and Webjet gave up 2.8%, while airlines Regional Express Holdings and Qantas lost 0.8% and 0.6% respectively.

The Materials sector was lifted by gains from mining heavyweights; Rio Tinto added 2.2% and Fortescue Metals rose 2.1%, while BHP closed up 1.1%. Gold miners were also stronger; Evolution Mining gained 2.7%, while Northern Star Resources and Newcrest Mining lifted 2.1% and 1.5% respectively.

Buy-now-pay-later providers continued to weaken due to news that Apple may enter the market; Afterpay slipped 2.3%, while Zip Co lost 5.6%. However, Sezzle rallied 5.2% after it was announced US credit card provider Discovery Financial Services is investing US$40 million with the company.

Sydney Airport lifted 0.1% yesterday following an announcement the board have rejected the Consortium’s takeover offer of $8.25 per share, as they concluded that the proposal undervalues the company and is not in the best interest of shareholders.

The Australian futures point to a 0.08% fall today.

Overseas Markets

European sharemarkets weakened overnight, as the UK recorded its highest daily increase in COVID-19 cases since 15 January. The Energy sector underperformed; BP gave up 2.9%, while Royal Dutch Shell shed 2.5%. Wind energy stocks saw declines; Siemens Gamesa Renewable Energy slumped 14.4% after the company revised earnings guidance following sharp increases in raw material costs, while Vestas Wind Systems lost 6.4%. By the close of trade, the UK FTSE 100 gave up 1.1%, while the German DAX and STOXX Europe 600 both fell 1.0%.

US sharemarkets were mixed on Thursday. The Energy sector was the weakest performer, down 1.4%, followed by the Information Technology sector, which fell 0.8%. Spotify lost 2.2% and Facebook slipped 0.9%, while Alphabet and Microsoft closed down 0.6% and 0.5% respectively. Financial services stocks were mixed; PayPal shed 1.4% and Mastercard slipped 1.2%, while Visa gained 1.0%.

By the close of trade, the Dow Jones added 0.2%, while the S&P 500 and NASDAQ fell 0.3% and 0.7% respectively.

CNIS Perspective

The Australian unemployment rate has dropped to its lowest level since 2011, to now sit at 4.9%, a remarkable achievement considering what the economy has endured over the past 18 months.

Yesterday’s data now points to a labour market moving beyond the ‘recovery’ phase and into an ‘expansionary’ phase.

The latest lockdowns may cause a slight hiccup to the rate in the short-term, however the long-term trajectory remains intact, with some economic forecasts pointing to a drop in the unemployment rate below 4% by the end of 2022!

However, what is yet to be seen is a material pick-up in wages growth, which typically occurs as the labour market tightens. It appears the unemployment rate needs to continue trending lower before we see this occur.

Unemployment rate and wages growth - last 10 years

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