Pre-Open Data
Key Data for the Week
- Wednesday – US – FOMC Meeting Minutes indicated the central bank will reduce its bond holdings by US$95 billion per month.
- Thursday – AUS – Trade Balance
- Thursday – EUR – Retail Sales
Australian Market
The Australian sharemarket ended Wednesday’s session down 0.5%, on the back of faded investor optimism in overseas markets on Tuesday night. The likelihood of more aggressive interest rate hikes in the US, which resulted in weakness in US technology stocks, was also felt in the local sharemarket, as the Information Technology sector fell 2.9%. Key detractors were Block and lithium battery designer, Novonix, which both slipped 6.9%. Other notable movers included Xero (-2.9%) and Megaport (-3.1%).
Most sectors were under sale pressure, except Financials (0.7%) and Consumer Staples (0.1%). Given Financials is the largest sector by market value, uplift from the major banks helped claw back losses on Wednesday. This uplift can be partly explained by higher interest rate expectations, particularly after the Reserve Bank of Australia’s statement on Tuesday. Commonwealth Bank, NAB and ANZ closed between 1.2-1.3% higher, while Westpac rose 0.8%. Although, gains were mixed, as investment bank Macquarie Group (-0.9%) lost ground, alongside fund managers Australian Ethical Investment (-0.6%) and Magellan Financial Group (-6.0%).
The Materials sector declined 1.5% on Wednesday, after it retraced some of the recent gains due to elevated commodity prices. Mining heavyweights BHP (-1.0%), Rio Tinto (-1.2%) and Fortescue Metals Group (-0.3%) all fell. Meanwhile, Mineral Resources bucked the downward trend, up 1.1%. The Materials sector has broadly advanced 11.9% this calendar year to date.
The Australian futures market points to a 0.28% decline today.
Overseas Markets
European sharemarkets declined on Wednesday, to break their three day win streak. Losses were broad based, with technology and travel related stocks being the primary laggards. Meanwhile, German industrial order data fell further than expected in February, which reaffirmed concerns of slower economic growth in the region. In company news, wind turbine producer Vestas (-3.0%) announced in its annual general meeting a ‘complete withdrawal’ from Russia due to its invasion of Ukraine. The firm operated two facilities and had four wind farm projects in development in Russia, which have now been halted. By the close of trade, the STOXX Europe 600 (-1.5%), German DAX (-1.9%) and UK FTSE 100 (-0.3%) all retreated.
US sharemarkets also fell on Wednesday, after investors digested forward guidance provided by the US Federal Reserve. The central bank indicated it would further tighten monetary policy by reducing its bond holdings by US$95 billion per month. Furthermore, of note was that many of its officials wanted to raise rates higher, but held back due to Russia’s invasion of Ukraine. The Information Technology sector was a notable detractor, broadly down 2.6%, after Microsoft (-3.7%), NVIDIA (-5.9%), Meta Platforms (-3.7%) and Netflix (-3.1%) slipped. By the close of trade, the S&P 500 (-1.0%), NASDAQ (-2.2%) and Dow Jones (-0.4%) all declined.
CNIS Perspective
Last week we noted how volatility, as represented by the Volatility or Fear index (VIX), reflected a calmer and less concerned mood in financial markets. It’s amazing how quickly markets and conditions can move, particularly at times like we are experiencing now.
With inflationary pressures mounting on the back of a number of factors, e.g., geopolitical, supply disruption, wages pressure, labour shortages and higher interest rates to name a few, the volatility index has reacted as it should.
In less than a week the VIX has jumped over 33% from a ‘normal’ level of sub 20 to now mid-20s.
It’s a timely reminder that we are in the early stages of a significant shift in economic conditions and volatility will be part and parcel of that change.
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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