Pre-Open Data
Key Data for the Week
Key economic data released this week:
- Monday – US – Chicago National Fed Activity Index
- Tuesday – EUR – Consumer Price Index
- Tuesday – UK – ILO Unemployment Rate
- Tuesday – US – Consumer Confidence
- Wednesday – AUS – Construction Work Done
- Wednesday – US – New Home Sales
- Thursday – EUR – Consumer Confidence
- Thursday – US – Gross Domestic Product
- Thursday – US – Initial Jobless Claims
Australian Market
The Australian sharemarket slid 1.3% on Friday to suffer its worst trading session since 28 January. Losses were broad based, with most sectors closing down. Friday’s decline saw the local ASX 200 close lower in back to back weeks for the first time since late October 2020.
The Financials sector was weighed down by the big four banks, which were mostly weaker; ANZ bucked the trend to climb 0.2%. Mining heavyweights BHP and Rio Tinto dragged Materials stocks down, ending the session down 2.5% and 3.3% respectively, while Telstra gained 0.3% to limit losses in the Telecommunications sector.
Despite the announcement of a significant FY20 net loss, QBE Insurance added 3.1%, after the company flagged the result to the market earlier in the month. Cochlear strengthened 8.4% after the hearing implant maker reported revenue and underlying profit falls in 1HFY21 were not as severe as analysts expected.
The Australian futures market points to a 0.16% fall today.
Overseas Markets
European sharemarkets rose on Friday, as positive quarterly earnings reports and strong regional factory data, which reached a three year high in February, boosted investor sentiment. Food group Danone and German insurer Allianz lifted 2.2% and 0.3% respectively following upbeat trading forecasts, however, Renault dropped 4.4%, after the French carmaker posted a record annual loss of €8 billion. By the close of trade, the broad based STOXX Europe 600 rose 0.5% to mark its third consecutive week of gains, while the German DAX climbed 0.8% and the UK FTSE 100 firmed 0.1%, after the British Pound rose to a three year high against the US Dollar.
US sharemarkets were broadly unchanged on Friday. Deer & Co. rose 9.9% after the farm machinery maker upgraded its earnings outlook following a strong Q1 earnings report. Technology heavyweights Amazon (-2.4%), Microsoft (-1.2%) and Facebook (-2.9%) all fell, along with payment services companies MasterCard (-1.6%), PayPal (-1.3%) and Visa (-2.2%). Apple bucked the trend to eke out a 0.1% gain, while Fortinet rose 2.5% and Teradyne added 4.5%. The Dow Jones and NASDAQ eked out a less than 0.1% gain, while the S&P 500 slid 0.2%.
CNIS Perspective
Last week the Japanese bellwether stock market index, the Nikkei 225, traded above 30,000 for the first time in more than three decades.
Its high in December 1989, when the index almost broke 40,000, is known as the mother of all melt-ups, with an incredible 60x price-to-earnings ratio, which makes the current NASDAQ price-to-earnings of 24x look cheap in comparison.
In the 1980s Japan was an economic dynamo, regarded as a serious challenger to US economic supremacy as Japanese companies went on a massive global acquisition spree and the nation’s exports flooded western markets. However, the reality was, the economic miracle was largely propped up by cheap government credit.
Subsequently, the sharemarket plunged 60% across the following two years and as much as 80% from its peak. Successive governments tried to restart the economy through near zero interest rates, pioneering quantitative easing, all with little success for decades.
With the Japanese economy now showing signs of life after investors had to wait decades for a return on their capital, market pundits are beginning to draw parallels between today’s US markets and one of the most notorious bubbles in living memory. However, comparatively we are far from these levels. If valuations were to reach highs previously seen in Japan, US equity indices would need to rise another 50-100%!
Should you wish to discuss this or any other investment related matter, please contact your Investment Services Team on (02) 4928 8500.
Disclaimer
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