Pre-Open Data
Key Data for the Week
- Monday – AUS – NAB Business Confidence and Conditions
- Monday – AUS – Retail Sales
- Tuesday – AUS – Federal Budget
- Tuesday – CHINA – Consumer Price Index
- Wednesday – EUR – Industrial Production
- Wednesday – UK – Gross Domestic Product
- Thursday – AUS – Consumer Inflation Expectations
- Thursday – US Producer Price Index
- Friday – US – Industrial Production
- Friday – US – Retail Sales
Australian Market
The Australian sharemarket edged up 0.3% on Friday in a mixed session of trade. The Materials sector was the strongest performer, while the Information Technology sector was the weakest, led lower by Afterpay which fell 4.1%, to close down 18.9% for the week.
The Financials sector rose 0.5% on Friday to close up 1.8% for the week. The big four banks all rose between 0.3% and 1.1% on Friday. Over the course of the week, Commonwealth Bank and Westpac outperformed, up 5.5% and 4.4% respectively, while ANZ underperformed, down 3.4%. Commonwealth Bank hit a 52-week high and is due to report this Wednesday.
Travel stocks bounced back following the new COVID-19 concern in Sydney; Webjet and Flight Centre added 7.4% and 7.3% respectively.
The Australian futures market points to a 0.06% fall today.
Overseas Markets
European sharemarkets closed higher on Friday, to close at a record high following strong earnings and economic data. Renewable energy companies Vestas Wind Systems and Siemens Gamesa added 5.4% and 2.6% to rebound from recent weakness. By the close of trade, the broad based STOXX Europe 600 rose 0.9%.
US sharemarkets were also stronger on Friday. The Energy, Industrials and Materials sectors were the strongest performers, while Consumer Staples underperformed. Canadian cryptocurrency miner Bitfarms climbed 23.0% after the company gained approval to be listed on the NASDAQ. The Dow Jones and S&P 500 both added 0.7%, while the NASDAQ gained 0.9%.
CNIS Perspective
US employment data announced on Friday had a huge miss on expectations, highlighting how macro data has become more difficult than usual to predict and interpret due to enormous central bank interventions and aggressive stimulus policies. The US economy created only 266,000 jobs compared to the 1,000,000 expected, while the unemployment rate rose to 6.1% instead of the fall to 5.8% anticipated. This caused shares to rally with more involvement from the US Federal Reserve likely. With the US unemployment rate rising rather than falling, the central bank remains far away from its unemployment target, although inflation expectations are now above the Fed’s 2.0% target.
There is now mounting evidence, including the latest employment report, that the jobless benefits provided by the Federal Government have been providing a disincentive to work. On Friday, the US Chamber of Commerce issued a statement calling on Congress to cancel the extra US$300 in weekly unemployment benefits, citing labour shortages. It claimed the benefit “results in approximately one in four recipients taking home more in unemployment than they earned working”.
With the US inflation announcement this week expected to headline at 3.6%, this will only add pressure for the Federal Open Market Committee to slow down its ultra-loose monetary policy. This is at the same time President Biden urges Congress to pass his proposals for US$2.3 trillion in infrastructure spending and US$1.8 trillion in social safety net spending over the next decade. If no agreement is reached with the Republicans, the Democrats could still pass their plans using their slim majorities.
Criticised for not acting quickly and with enough stimulus in 2008 post-GFC, many economists are now concerned too much emphasis has been placed on unreliable distorted data, causing central banks and governments to attempt to fix the issues with a wall of money. This wall of money, including actions by the Federal Reserve and legislative spending, is now more than US$7 trillion, with nearly twice that again already available (not including Biden’s recent proposals), which someday will need to be repaid.
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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