Pre-Open Data
Key Data for the Week
- Thursday – US – Consumer Price Index rose 0.8% in the month, to 7.9% in year-end terms.
- Thursday – AUS – Consumer Inflation Expectations reached 4.9% in March.
- Friday – UK – Industrial Product
Australian Market
The Australian sharemarket enjoyed its best day in over four weeks yesterday to close up 1.1%, as the surging oil price eased from recent highs. This came as the United Arab Emirates stated they will provide more oil as more countries boycott Russia.
The Information Technology sector was the best performer on the market for the second consecutive day, up 3.3%. Family-tracking app, Life360, added 6.8%, while buy-now-pay-later providers, Block and Zip, jumped 7.1% and 4.6% respectively.
Travel stocks have been heavily weakened of late as a result of the increased oil prices. However, the decreased oil price resulted in gains across the travel stocks yesterday. Qantas and Webjet both added 5.8%, while Corporate Travel Management and Webjet lifted 5.1%.
The main laggard yesterday was the Materials sector, which closed the trading day down 1.8%. Fortescue Metals lost 3.4% and Rio Tinto dropped 2.3%, while BHP slipped 1.5%.
In company news, Myer Holdings soared 24.4% after the company announced improved first-half sales and the re-instatement of their dividend.
The Australian futures market points to a 0.65% decline today.
Overseas Markets
European sharemarkets lost ground overnight, with the fall led by the Financials and Information Technology sectors. Semiconductor producers, ASML Holdings and Infineon Technologies lost ground, as they fell 2.1% and 3.8% respectively. Among the banks, BNP Paribas lost 4.0%, Santander Group conceded 1.4% and ING Groep dropped 4.8%.
By the close of trade, the STOXX Europe 600 lost 1.7% and the UK’s FTSE 100 dropped 1.3%, while the German DAX closed the session 2.9% lower.
US sharemarkets also closer lower on Thursday, as inflation hit a four-decade high. Investors now expect the Federal Reserve will increase rates at the FOMC meeting next week. The Information Technology sector declined after yesterday’s rally and as a result, Apple lost 2.7%, Microsoft dropped 1.0% and Alphabet closed the session 0.9% lower. The Financials sector also lost ground; Wells Fargo slipped 0.3%, while Bank of America and Goldman Sachs fell 0.9% and 1.1% respectively.
By the close of trade, the Dow Jones lost 0.3%, while the S&P 500 and NASDAQ declined 0.4% and 1.0% respectively.
CNIS Perspective
Russia is steadily heading towards defaulting on its external debt obligations, but not for the first time. The country faced similar financial crisis’ in 1998 and 2014.
Contagion to global financial markets should be limited, as Russian assets are not widely held and most of the country’s debt is financed internally.
Data from the Bank of International Settlements shows that the greatest exposure to Russia is by European banks.
The European banking system has built itself back up to a clean bill of health ever since the European debt crisis. However, the impact of higher energy costs on European growth and the dovish messaging from the European Central Bank overnight, are not positive for the Financials sector.
While it is still early for a full assessment of how higher oil and gas prices will impact the European economy, the downside risks to growth are much larger than for Asia or the US, as to is the chance of stagflation (persistent high inflation combined with high unemployment and slow economic growth) materialising.
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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