Pre-Open Data
Key Data for the Week
Australian Market
The Australian sharemarket posted a 1.1% loss yesterday. All sectors except Consumer Staples were weaker. The Information Technology sector led the losses, down 4.2%, followed by Energy and Telecommunications, which lost 2.7% and 1.4% respectively.
The Materials sector dropped 1.2%, weighed down by mining heavyweights. Fortescue Metals lost 2.8% and Rio Tinto gave up 1.8%, while BHP slipped 0.7%. Goldminers were also weaker; Northern Star shed 3.4%, while Newcrest Mining and Evolution Mining both lost 0.8%.
The Information Technology sector was dragged lower by weakness among buy-now-pay-later providers. Zip Co sunk 9.1% and Afterpay tumbled 8.7%, while Sezzle lost 5.6%. Accounting software provider Xero gave up 3.0%, while artificial intelligence company Appen fell 3.6%.
All major banks were weaker; Westpac fell 1.3% and ANZ lost 1.1%, while NAB and Commonwealth Bank eased 1.0% and 0.6% respectively. NAB announced its intention to acquire digital bank 86 400 following Federal Court approval.
The Consumer Staples sector lifted 0.3%. Supermarket giants Woolworths and Coles both finished the session higher, up 1.1% and 0.6% respectively. However, A2 Milk gave up 6.4% and Bega Cheese slipped 0.8%.
The Australian futures market points to a 0.64% fall today, driven lower by weaker overseas markets.
Overseas Markets
European sharemarkets declined overnight, with travel, retail and technology stocks the weakest performers. International Airlines Group shed 7.4%, while easyJet fell 3.5% and Ryanair lost 3.0%. The Financials sector also weakened; Europe’s largest bank HSBC gave up 3.2% and Barclays fell 2.9%, while Lloyds Bank and Deutsche Bank lost 2.3% and 2.1% respectively. By the close of trade, the UK FTSE sunk 2.5% and the broad-based STOXX Europe 600 lost 2.0%, its largest decline since late December, while the German DAX fell 1.8%.
US sharemarkets also weakened, as all sectors except Materials closed lower. The Information Technology sector eased 0.2%; Alphabet lost 1.4% and Apple slipped 0.7%, while Microsoft and Spotify gave up 0.4% and 0.1% respectively. By the close of trade, the Dow Jones and S&P 500 dropped 1.4% and 0.9% respectively, while the NASDAQ eased 0.1%.
CNIS Perspective
As the price of iron ore continues to surge, it is interesting to note the expectations released in the Australian Federal Budget overnight show a stark contrast to today’s prices.
According to the Government’s forecasts, the iron ore price is forecast to decline to US$55/tonne by the March quarter of 2022.
Surprising, considering the iron ore price has soared to a current price of US$215/tonne, due to strong Chinese demand and supply disruptions in Brazil.
While it can be argued the price is extremely elevated at the moment, it is hard to imagine the price falling nearly 75%.
The Government may be playing two cards here. The first, and most likely, being an election year next year, the conservative estimate of iron ore would suggest a high chance the Government’s bottom line will turn out much better than forecast.
The second and more sinister view, is the Government may be concerned China will find a way of punishing Australian iron ore providers, adding to the ever-growing list of export restrictions with our largest trading partner, which has seen curbs to the likes of coal, wine, barley, beef, wheat, lobsters, cotton and as at yesterday, LNG.
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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