Morning Market Update - 27 November 2020

By Phillip Smith - November 27, 2020

Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Thursday – EUR – ECB Monetary Policy Meeting minutes highlighted the need to maintain financing conditions to support economic recovery.
  • Friday – EUR – Consumer Confidence

S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket fell 0.7% yesterday, to snap a three-day winning streak and ease from its extraordinary November run of over 10%.

The big four banks were amongst the weakest performers; NAB led the declines, down 2.4%, while ANZ, Commonwealth Bank and Westpac all fell between 1.3% and 1.7%.

Travel related stocks weakened following recent strength; Atlas Arteria slipped 2.1% and Transurban fell 1.5%, while Webjet and Sydney Airport lost 2.2% and 1.0% respectively.

Mining heavyweights weighed on the Materials sector; Rio Tinto lost 1.4%, while BHP and Fortescue Metals fell 0.6% and 0.3% respectively.

Bega Cheese entered a trading halt after the company agreed to buy Lion Dairy & Drink for $534 million. The company said it would raise $401 million from institutions and retail investors to fund the purchase.

WiseTech Global rose 0.9% after the company announced at its AGM it expects earnings growth of 22% - 42%, to between $155 million and $180 million.

The Australian futures market points to a 0.24% fall today.

Overseas Markets

European sharemarkets were mixed on Thursday. Germany announced it will extend coronavirus restrictions until 20 December, while the UK outlined an upgraded tier system to replace national lockdown restrictions on 2 December. The new system sees London and Liverpool as tier two level, while worse affected areas such as Manchester and Birmingham are tier three.

By the close of trade, the broad based STOXX Europe 600 and France’s CAC 40 both lost 0.1%, UK’s FTSE 100 fell 0.4% and Germany’s DAX was flat.

US sharemarkets were closed overnight due to the Thanksgiving Day holiday.

CNIS Perspective

This month’s breakthrough in the hunt for a COVID-19 vaccine, along with a weaker US Dollar, has rekindled interest in some riskier investments. Emerging market currencies and stocks have been big winners, with the MSCI Emerging Market Index now up 50% from its lows. Additionally, data this week from Bank of America showed the amount of money flowing into emerging market funds last week hit an all-time high.

This is in sharp contrast to earlier in the year when more than US$70 billion was pulled out of emerging market funds during the height of the pandemic, with many developing nations among the hardest hit by the pandemic. Their governments and central banks weren’t able to spend anywhere close to as much as the US or Europe to support their economies, leading to sharp contractions and flimsy recoveries.

Whilst many believe the emerging market stocks and bonds still look attractive, particularly in comparison to the S&P 500, the US Dollar remains a concern. The current weaker US Dollar makes it easier for emerging markets to repay their enormous borrowings. Any strengthening of the dollar may cap the startling emerging market rebound.

MSCI Emerging Markets indices, rebased

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