Pre-Open Data
Key Data for the Week
Key economic data released this week:
- Tuesday – AUS – NAB Business Conditions & Confidence – Business Confidence rose 5 points in January to 10, which remains above the long run average. While Business Conditions fell 9 points in January to 7.
- Wednesday – CHINA – Consumer Price Index
- Wednesday – US – Consumer Price Index
Australian Market
The Australian market eased from Monday’s 11-month high to closed 0.9% lower yesterday. Losses were broad-based, with the REITs and Utilities sectors the weakest performers, down 2.1% and 1.4% respectively.
The Financials sector closed 0.7% weaker, weighed down by losses among the big four banks. ANZ slipped 1.9% and NAB dropped 1.7%, while Commonwealth Bank and Westpac lost 1.3% and 1.2% respectively. Investment group Challenger tumbled 14.8% after the company released its first half 2021 report. Net profit after tax had improved 1.1% on a year ago, however fell short of expectations. However, Macquarie Group climbed 6.6% after the company released its third quarter update, which reported the performance of its annuity-style and markets-facing businesses had improved on the previous year, while FY21 profits are expected to be lower than the previous year.
The Materials sector also underperformed; BHP and Rio Tinto both lost 0.5%, while Fortescue Metals bucked the trend to add 0.7%.
The Healthcare sector slipped 1.1% yesterday. Ramsey Health Care lost 1.8% and CSL fell 1.3%, while Sonic Healthcare and Cochlear gave up 0.8% and 0.1% respectively.
The Australian futures market points to a 0.19% rise today.
Overseas Markets
European sharemarkets were mixed on Tuesday, with the Utilities and Energy sectors the weakest performers. BP slipped 1.4%, while energy major Total SE fell 1.8% after the company reported a US$7.2 billion net loss in 2020 due to write-downs on assets. By the close of trade, the STOXX Europe 600 fell 0.1% and the German DAX lost 0.3%, while the UK FTSE 100 lifted 0.1%.
US sharemarkets were also mixed overnight. The Materials and Energy sectors underperformed, as ExxonMobil lost 1.2% and Chevron fell 0.6%. The Information Technology sector also closed weaker, down 0.2%. NVIDIA eased from Monday’s strong gains to close down 1.2%, while Apple and Alphabet fell 0.7% and 0.5% respectively. Despite weakness in the Information Technology sector, Spotify and Facebook gained 3.2% and 1.1% respectively. By the close of trade, the Dow Jones and S&P 500 both fell 0.1%, while the NASDAQ added 0.1%.
CNIS Perspective
The signs of inflation have been off the radar for some time, despite significant quantitative easing from central banks and government spending.
However, recent movements in longer dated bond yields are showing signs that maybe the widely held view of low inflation is starting to turn.
Since the start of 2021, bond investors have been selling longer dated US Treasury notes, betting that the recent US$1.9 trillion stimulus bill put forward by the Biden administration will boost US economic growth and eventually lead to higher levels of inflation.
Longer-dated bonds are more sensitive to inflation and growth expectations, and the spreads between these yields and short dated bonds are beginning to widen. The difference in yield on the 30-year Treasury note and the shorter-term five-year note is now the widest since October 2015, while the gap between the 10-year and two-year yields have reached its widest point since 2017.
Inflation rising from years of benign levels is something policy makers have been hopeful of for some time. Not only will it be a sign that slack within the economy is beginning to tighten, but allow debtors, such as the US Government, to repay their loans with money that is less valuable than the money they borrowed.
Should you wish to discuss this or any other investment related matter, please contact your Investment Services Team on (02) 4928 8500.
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