Pre-Open Data
Key Data for the Week
Australian Market
The Australian sharemarket declined for a second consecutive day on Thursday, down 0.6%, with the Information Technology (-3.4%) sector being the major detractor. A key influence was another sell down of US technology stocks on Wednesday night. It seems enthusiasm for technology related stocks has dwindled, as expectations of higher interest rates and slower economic growth has caused investors to reconsider company earnings and valuations. Key detractors in yesterday’s session included WiseTech Global (-6.6%), Xero (-2.9%), Block (-4.3%) and Megaport (-4.7%).
While most sectors closed in the red, the more defensive Consumer Staples (0.6%), Utilities (0.5%) and REIT (0.2%) sectors managed to finish ahead. Notable contributors included Coles Group (0.9%), AGL Energy (2.4%) and Goodman Group (1.8%).
In company news, Magellan Financial Group rebounded 11.4%, after the fund manager reported better than expected data on its funds under management. Despite the surge in share price, the company still posted net outflows over the month of March.
The Financials sector performed in line with the overall market, down 0.6%, as all major banks weakened. Westpac (-0.5%), Commonwealth Bank (-0.4%) and NAB (-0.3%) edged lower, while ANZ closed relatively flat. Meanwhile, Macquarie Group gave up 1.5%.
The Australian futures market points to a 0.51% increase today.
Overseas Markets
European sharemarkets closed lower on Thursday, as economically sensitive sectors like Technology (-1.0%) and Oil and Gas (-1.6%) lost ground. Notable detractors included Infineon Technologies (-2.1%) and Shell (-2.1%). Meanwhile, more defensive sectors like Health Care (1.4%), Construction and Materials (0.3%) and Chemicals (0.4%) strengthened. By the close of trade, the STOXX Europe 600 conceded 1.2%, while the German DAX and UK FTSE 100 both gave up 0.5%.
US sharemarkets somewhat recovered on Thursday, after losses experienced in the last few sessions due to the US Federal Reserve’s commentary around monetary policy tightening. Most sectors closed in the green, while Communications Services (-0.7%) and Real Estate (-0.9%) were the main detractors. In support of recent investor sentiment, defensive sectors like Health Care (1.9%) and Consumer Staples (1.2%) were major gainers. In company news, HP surged 14.8% after Warren Buffet’s Berkshire Hathaway purchased a US$4.2 billion stake in the computer and printer manufacturer. By the close of trade, the S&P 500 and Dow Jones inched between 0.3%-0.4% higher, while the NASDAQ closed relatively flat.
CNIS Perspective
The conflict in Ukraine added to existing pressure on risk assets during the first quarter of 2022, alongside concerns over the pace of monetary policy tightening by developed market central banks to contain inflation, especially the US Federal Reserve.
Historically, the negative impact from geopolitical conflicts and the start of a US interest rate-hike cycle will dissipate over time.
The market correction in the first quarter has restored some value to equities and the outlook for global corporate earnings remains positive and should be able to withstand the valuation de-rating associated with higher interest rates.
European equities are likely to face some domestic economic challenges in the short-term due to greater exposure to the current bout of geopolitical conflict, however higher energy costs are unlikely to derail the economic recovery momentum in the US and Asia.
Concerns over the Fed’s policy tightening should also fade as the path of higher rates become clearer. Historically, risk assets perform well after the Fed’s rate-hike cycle gets underway, as shown in the graph.
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