Pre-Open Data
Key Data for the Week
- Wednesday – EUR – Consumer Confidence fell to -18.7 in March, versus the forecast -12.9.
- Wednesday – US – New Home Sales fell 2.0% in February, below expectations.
- Wednesday – UK – Consumer Price Index rose to an annualised rate of 6.2% in February, above expectations of 5.9%.
Australian Market
The Australian sharemarket advanced 0.5% on Wednesday, pushed higher by the Information Technology (3.5%) and Financials (1.0%) sectors. The broad rally was experienced in all corners of the market, except the Materials (-0.4%) sector, which weakened slightly as BHP (-0.8%), Northern Star Resources (-2.0%) and Mineral Resources (-1.6%) lost ground.
The Information Technology sector was propelled higher by Block, Afterpay’s parent company, which jumped 7.5%. Zip rebounded 7.5% to $1.65 per share, after its recent sell-off amid valuation concerns given the current interest rate environment. Other major performers included WiseTech Global (2.1%) and Xero (4.2%).
Similarly, the Financials sector closed 1.0% higher, after all major banks closed in the green. The positive move reflected expected interest rate increases, which were reinforced by the US Federal Reserve’s comments earlier in the week. NAB (1.6%) led gains, followed by Commonwealth Bank (1.3%), Westpac (0.8%) and ANZ (0.8%). Another notable mover in the sector was Australian Ethical Investment, which rebounded 3.5%.
A notable performer in yesterday’s session was Uniti Group (10.7%), which surged after it received a new takeover bid. Macquarie Group (1.3%) has partnered with PSP Investments, a Canadian pension investment manager, to place a $5 per share bid on the Telecommunications company.
The Australian futures market points to a 0.74% decrease today.
Overseas Markets
European sharemarkets closed lower on Wednesday, after investors chose to secure gains made over the past five days. Markets also softened as data showed that UK inflation lifted to a new 30-year high of 6.2% in February. In response, the British government announced it will cut petrol tax to address the cost-of-living crisis, a fiscal policy estimated to cost £5 billion. Energy stocks were key performers in the session, broadly up 2.0%, in response to higher oil prices. On the other hand, banking stocks fell by 2.1%. By the close of trade, the STOXX Europe 600 closed 1.0% lower, while the German DAX dipped 1.3% and the UK FTSE 100 eased 0.2%.
US sharemarkets also fell on Wednesday, dampened by the Financials and Health Care sectors, which both lost 1.8%. Meanwhile, speeches from US Federal Reserve officials reaffirmed market expectations that the next rate hike will be 50 basis points. The Information Technology sector fell 1.5%, after NVIDIA (-3.4%), Netflix (-2.2%) and Microsoft (-1.5%) declined. Apple (0.8%) notably held its ground, alongside cybersecurity provider CrowdStrike (1.1%). Amazon dipped 0.9%, however, has rallied ~20.0% since hitting a 20-month low earlier this month, a turnaround sparked after it announced its stock split and share buyback plan. By the close of trade, the S&P 500, NASDAQ and Dow Jones all closed ~1.3% lower.
CNIS Perspective
US Federal Reserve Chair Jerome Powell makes some interesting points when discussing higher interest rates in the US in the foreseeable future.
While conjecture is mounting that an inverse yield curve is the precursor to a recession, given their positive correlation over the past 60 years, Powell questions whether this is necessarily the case.
“Recessions chronologically followed the conclusion of a tightening cycle, but the recessions were not apparently due to excessive tightening of monetary policy,” he said.
For example, the 2019 recession was pandemic induced, even though it followed the raising interest rates of 2015 – 2019.
"I don’t see a reason to think that the likelihood of a recession in the next year is elevated and the main reason I don’t see that is because the economy is very, very strong.” “This is an economy that can handle tighter monetary policy.”
Interesting comments that may well prove to be correct.
Should you wish to discuss this or any other investment related matter, please contact your Wealth Management Team on (02) 4928 8500.
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