Pre-Open Data
Key Data for the Week
- Monday – EUR – Industrial Production
- Tuesday – AUS – RBA Board Meeting Minutes
- Tuesday – EUR – Gross Domestic Product
- Tuesday – UK – ILO Unemployment rate
- Wednesday – US – Retail Sales
- Wednesday – UK – Consumer Price Index
- Thursday – AUS – Unemployment Rate
- Friday – US – Existing Home Sales
- Friday – UK – Retail Sales
Australian Market
The Australian sharemarket eased 1.0% on Friday, following the release of higher-than-expected US inflation data. The Materials sector was the strongest performer, up 0.3%, while all other sectors closed in the red. Over the week, the local ASX 200 rose 1.4%.
Travel stocks rallied during the week following the announcement that Australia will reopen international borders for the first time in almost two years. On Friday, Qantas lifted 0.2% and Webjet added 0.3%, while Flight Centre gained 1.5%.
The major banks were mixed; Commonwealth Bank was the main laggard, down 2.2%, while ANZ, NAB and Westpac all gained between 0.4% and 0.7%. Fund managers were weaker; Challenger slipped 2.2% and Australian Ethical Investment gave up 3.9%, while Magellan Financial Group lost 4.9% after the company reported funds under management has fallen 8.8% since the start of the year.
Mining heavyweights advanced; BHP added 1.2% and Fortescue Metals closed up 2.5%, while Rio Tinto gained 2.9%.
The Australian futures market points to a 0.47% fall today, driven by weaker overseas markets.
Overseas Markets
European sharemarkets posted losses on Friday. Banking stocks were mixed; Barclays slipped 1.8% and Deutsche Bank fell 0.4%, while Lloyds Bank and HSBC added 0.3% and 1.0% respectively. Renewable energy stocks were also mixed; Siemens Gamesa Renewable Energy eased 0.1%, while Vestas Wind Systems rose 1.6%.
By the close of trade, the STOXX Europe 600 fell 0.6% and the German DAX slipped 0.4%, while the UK FTSE 100 gave up 0.2%.
US sharemarkets also fell on Friday. Technology stocks were weaker; NVIDIA shed 7.3% and Fortinet gave up 4.6%, while Microsoft and Apple lost 2.4% and 2.0% respectively. The Health Care sector was mixed; Danaher Corporation closed down 3.4% and Johnson & Johnson slipped 1.0%, while Moderna and Bristol-Myers Squibb both lifted 0.6%.
By the close of trade, the Dow Jones fell 1.4%, while the S&P 500 and NASDAQ slid 1.9% and 2.8% respectively. Over the week, the Dow Jones lost 1.0% and the S&P 500 closed down 1.8%, while the NASDAQ fell 2.2%.
CNIS Perspective
Only a month ago, a significant percentage of investors thought that the US Federal Reserve would not need to raise interest rates in March. However, a 40-year high inflation print last Thursday, to 7.5%, has seen expectations of a 50bps hike in March now almost fully priced. Following Thursday’s data, on Friday the US Federal Reserve announced on their website a Closed Board Meeting on February 14, 2022, which stated the Fed would commence a “review and determination by the Board of Governors of the advance and discount rates to be charged by the Federal Reserve Banks”.
Despite Vladimir Putin’s threats of imminent invasion of neighbouring Ukraine, global markets have spent more time fearing the actions of Federal Reserve Governor Jerome Powell. After receiving heavy criticism for failing to react to building inflationary pressures, labelling the supply chain issues as a “transitory” effect, an emergency rate hike tonight by the Fed could signal panic and invite concerns it has fallen behind the curve.
Whilst stocks can go higher with inflation and interest rates, the last two cycles when the US Federal Reserve lifted interest rates, in June 2004 and December 2015, sent the US S&P 500 lower by 6.5% and 11.5% respectively in the 30 to 40 trading days following the announcement. Anticipation that a surprise “out-of-cycle” meeting today may spoil some Valentines celebrations has been dismissed by most market commentators, however it is possible.
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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