Morning Market Update - 8 December 2020

By Phillip Smith - December 08, 2020

Pre-Open Data

International Markets vs Australian Market

Key Data for the Week

Key economic data released this week:

  • Monday – CHINA – Trade Balance widened to a record US $75.4 billion in November, from US $58.4 billion in October.
  • Tuesday – AUS – NAB Business Conditions & Confidence
  • Tuesday – EUR – Gross Domestic Product

S&P ASX 200 Last 12 Months

Australian Market

The Australian sharemarket extended its gains on Monday to five consecutive days after the ASX 200 improved 0.6%. The Materials and Information Technology sectors were the strongest performers, both up 1.5%, while the Utilities and Consumer Discretionary sectors closed in the red.

The Materials sector saw strong gains yesterday as iron ore prices surged 5.4% due to strong demand from China. Fortescue Metals climbed 3.8%, while Rio Tinto and BHP rallied 2.5% and 2.1% respectively. Goldminers were mixed on Monday; Evolution Mining fell 1.0% and Northern Star lost 0.5%, while Newcrest Mining rose 0.2%.

The Financials sector also advanced. Westpac closed flat after the company announced the sale of Westpac Fiji and its 89% stake in Westpac PNG for up to $420 million. ANZ added 0.2% and NAB rose 0.5%, while Commonwealth Bank lifted 0.7% after the company gained a banking license for its Dutch subsidiary.

The Information Technology sector rallied yesterday. Accounting software platform, Xero, jumped 4.2% and Appen rose 0.8%. Buy-now-pay-later companies were mostly lower; Afterpay lifted 2.2%, while Splitit sunk 4.8%, Sezzle lost 3.3% and Zip Co fell 1.1%.

The Australian futures market points to a 0.15% fall today.

Overseas Markets

European sharemarkets were mixed overnight as Brexit negotiations continued. British Prime Minister Boris Johnson and EU President Ursula von der Leyen issued a joint statement that indicated a new trade deal was impossible due to “remaining differences on critical issues”. The Financials sector was the weakest performer; Lloyds Bank and HSBC lost 4.3% and 2.6% respectively, while Deutsche Bank fell 1.7% and Barclays slipped 1.6%. By the close of trade, the broad based STOXX Europe 600 fell 0.3% and the German DAX lost 0.2%, while the UK FTSE 100 added 0.1%.

US sharemarkets were also mixed on Monday as investors anticipated details of potential COVID-19 relief stimulus. The Information Technology sector outperformed; Spotify surged 7.0% and Facebook jumped 2.1%, while Apple and NVIDIA lifted 1.2% and 0.4% respectively. However, Intel fell 3.4% following reports Apple is planning a new series of Mac processors in 2021. The Energy sector was the weakest performer, down 2.4%, following a fall in global oil prices. Chevron lost 2.7%, while ExxonMobil slipped 1.9%. The Dow Jones closed down 0.5% and the S&P 500 fell 0.2%, while the NASDAQ climbed 0.5% to close at a record high.

CNIS Perspective

The relationship between consumer confidence, consumer spending and GDP growth is a theory that we have highlighted many times in the past.

Last week’s GDP number for the September quarter illustrates quite clearly this is more than just a theory, but a reality. As growing hopes of a vaccine hit the market and lockdowns eased in Australia, an almost knee jerk reaction to consumer confidence has seen a significant jump in the quarterly GDP number.

Corresponding to this is a fall in the household savings rate as consumers loosen the purse strings.

Gross domestic product

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