Pre-Open Data
Key Data for the Week
- Wednesday – UK – Consumer Price Index rose by an annualised rate of 7.0% in March, its highest level in 30 years.
- Thursday – AUS – Unemployment Rate
- Thursday – US – Retail Sales
Australian Market
The Australian sharemarket delivered its second gain for the week on Wednesday, up 0.3%, after a broad increase in commodity prices. The Materials sector (0.6%) was supported by higher gold and iron ore prices, while the Energy sector (1.0%) benefitted from a ~6.0% surge in the price of oil on Tuesday night. Notable gainers included Rio Tinto (2.0%) and Mineral Resources (4.5%), alongside Paladin Energy (9.6%) and Santos (1.3%).
The Consumer Discretionary (0.5%), Health Care (0.4%) and Utilities (0.5%) sectors performed modestly on Wednesday. Key contributors included Wesfarmers (0.9%), Flight Centre (2.3%), Sonic Healthcare (1.6%) and Origin Energy (1.2%).
The primary detractor in yesterday’s session was the REIT’s sector, down 0.5%, after index heavyweight Goodman Group gave up 1.1%. Other important movers included Dexus (-0.7%) and Stockland (-0.5%). Meanwhile, the Information Technology and Telecommunications sectors closed flat.
The Financials sector inched 0.2% higher, after mixed performances from the major banks. Commonwealth Bank edged 0.2% lower, while Westpac (0.6%), ANZ (0.3%) and NAB (0.4%) advanced. Fund managers Australian Ethical Investment (2.4%) and Magellan Financial Group (3.1%) rallied, despite ongoing concerns around their funds under management.
The Australian futures market points to a 0.23% increase today.
Overseas Markets
European sharemarkets were relatively flat on Wednesday, as investors await the European Central Bank policy meeting on Thursday. Interestingly, the UK FTSE 100 inched 0.1% higher, despite news inflation in the United Kingdom had reached record heights in March. Meanwhile, the STOXX Europe 600 was flat and the German DAX edged 0.3% lower. Notable movers included mining stocks, broadly ahead 1.1%, and the Oil and Gas sector (0.9%). Commodity related companies are expected to fare better in an inflationary environment, which could partly explain yesterday’s performance.
US sharemarkets rose on Wednesday, despite strong inflation data and mixed quarterly earnings reports. The Producer Price Index, which represents prices paid by wholesalers, rose 1.4% in March. This represented an 11.2% increase year-on-year, the largest increase on record, and solidified inflationary concerns. In company news, the world’s largest asset manager, BlackRock (-0.2%), reported better-than-expected quarterly profit, while JPMorgan Chase (-3.2%) posted a decline in profits. Other notable movers in yesterday’s session included Microsoft (2.0%), NVIDIA (3.3%), Amazon (3.2%) and Taiwan Semiconductor Manufacturing Co. (4.2%). By the close of trade, the S&P 500 and Dow Jones gained ~1.1%, while the NASDAQ rose 2.0%.
CNIS Perspective
The Reserve Bank of Australia (RBA) will obviously resume raising the Official Cash Rate (OCR) sometime in 2022, but questions remain as to when they will start and what the rate will get to.
While the RBA is meant to be independent of politics, the 2007 election campaign must still haunt them. During that campaign the RBA raised the OCR and John Howard not only lost the election to Kevin Rudd (Kevin ‘07), but also his seat.
The RBA made it clear last month they are in no hurry to raise the OCR, maybe in anticipation of the upcoming election, and with memories of 2007 clearly in the back of their minds. As a result, June looks like the most logical month the OCR would commence rising.
As to how high the rate will get, given there are only 10 RBA meetings in a year, the highest it would possibly get to by this time next year is 2.60%, assuming the likely outcome of 0.25% each month.
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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