Pre-Open Data
Key Data for the Week
- Thursday – EUR – Unemployment Rate declined to 6.6% in May, from 6.7% in April, better than the expected 6.8%.
- Thursday – UK – Gross Domestic Product rose 0.8% in the quarter, to total 8.7% year on year.
- Friday – EUR – Consumer Price Index
Australian Market
The Australian sharemarket fell 2.0% on the last day of the financial year, as all sectors closed lower, which led the blue chip index to end the year in correction territory, down 10.2%. This was the third time in the past decade that Australian investors incurred a negative return. Some analysts have argued that such a correction was necessary to bring valuations back in line with current macroeconomic conditions and monetary policy.
Losses were led by the Utilities, REITs, Materials, Financials and Energy sectors, which all declined between 2.0%-3.0%. Notable detractors included index heavyweights BHP Group (-3.5%), Rio Tinto (-3.3%), Woodside Energy (-3.0%) and all four major banks, which each lost between 2.0%-3.0%.
The more defensive Health Care (-0.2%) and Telecommunications Services (-0.9%) sectors were the most resilient on Thursday. Important movers included CSL (-0.3%) and Sonic Health Care (0.6%), alongside Telstra (-1.0%) and REA Group (0.8%).
In company news, the Australian Securities and Investments Commission (ASIC) began civil penalty proceedings against financial planner Mercer Financial. The allegations relate to false or misleading representations when it came to fees charged and services provided.
The Australian futures market points to a relatively flat open today, up 0.20%.
Overseas Markets
European sharemarkets declined on Thursday, after the German DAX shed 1.7% and the UK FTSE 100 slipped 2.0%. The broader STOXX Europe 600 index gave up 1.5%, which contributed to its 10.7% decline in the June quarter and an ~9.3% fall for the financial year. Bank stocks were notable detractors, broadly down 2.8%, after Barclays (-2.3%), HSBC Holdings (-3.2%) and ING (-2.9%) all lost ground. Energy giants BP and Shell were other key movers, down 2.4% and 2.3% respectively.
US sharemarkets slipped on Thursday, after economic data released indicated consumer spending had lost steam, which fuelled recession concerns. Most sectors closed in the red, led by the cyclical Energy (2.0%) and Consumer Discretionary (-1.5%) sectors. By the close of trade, the Dow Jones conceded 0.8%, the S&P 500 lost 0.9% and the NASDAQ fell 1.3%. The S&P 500 had its worst quarter since March 2020, down 16.4%, and fell 20.6% in the first half of the calendar year. Meanwhile, the NASDAQ plummeted 22.4%, its worst quarter since the GFC in 2008, which led to a 29.5% decline in the first half of year, its worst ever half on record.
CNIS Perspective
Thank goodness that’s over! With the first half of 2022 calendar year over, our eyes now turn to the second half with hopes we don’t see a repeat of the first.
The S&P 500 index suffered its biggest first half year rout since 1970, but if the second half of the year follows 1970’s, it should be a far more positive experience. After falling 21% in the first half of 1970, the market rebounded 27% in the second half of the year.
While this example is encouraging, a broader analysis shows that since 1957, negative first half performance is only reversed into positive performance in the second half 50% of the time.
While these sort of comparisons are interesting to look back on, at the end of the day, it’s the economic and corporate fundamentals that will drive market outcomes, and while ever we live under the fear of high inflation and recession, it’s difficult to see a 1970’s style rebound happening.
But if inflation is controlled and recession avoided, 1970 shows anything is possible.
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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