Pre-Open Data
Key Data for the Week
- Wednesday – US – Retail Sales rose by a seasonally adjusted 3.8% in January.
- Wednesday – UK – Consumer Price Index rose to 5.5% year on year in January, its highest rate since 1992.
- Thursday – AUS – Unemployment Rate
Australian Market
The Australian sharemarket advanced 1.1% on Wednesday, supported by strong earnings reports. In particular, index heavyweight CSL (8.5%) boosted the local sharemarket, after it announced a 5% increase in revenue and upgraded its earnings guidance. The company’s stellar performance helped propel the Health Care sector 6.2% higher.
Most sectors closed in the green, with Energy (-0.7%) and Materials (-0.4%) being the only sectors in the red. This followed after a dip in the price of oil and iron ore, alongside a particularly poor result from Fortescue Metals Group (-2.0%). The iron ore miner recorded a 13% decline in revenue and a 32% drop in profits, which resulted in the company cutting its dividend by 41% to $0.86. BHP also suffered, down 1.8%, while Rio Tinto (-0.2%) largely held its ground.
The Financials (0.3%) sector edged higher, led by gains made by fund manager Australian Ethical Fund (2.3%), alongside investment bank Macquarie Group (1.6%). The major banks also performed well, with all four big banks ahead. ANZ closed 1.1% higher, followed by Westpac (1.0%), Commonwealth Bank (0.9%) and NAB (0.7%).
Other notable performers in the session included lithium miner Allkem (6.3%), chemical supply chain manager DGL Group (4.7%) and Australian Clinical Labs (2.1%).
The Australian futures market points to a relatively flat open today.
Overseas Markets
European sharemarkets fell slightly overnight, which reflected investor concern around record inflation data and the expectation that the Bank of England will raise interest rates for a third consecutive time next month. The STOXX Europe 600 and German DAX both closed 0.3% lower, while the UK FTSE 100 (-0.1%) was relatively flat. The Materials and Energy sectors drove gains, as most metal and oil prices firmed, while Consumer Staples stocks led losses. Key movers included London listed Rio Tinto (1.1%), Anglo American Plc (1.2%) and Tesco (-1.5%).
US sharemarkets closed relatively flat on Wednesday, as investors were similarly concerned about elevated inflationary levels, alongside the geopolitical risk around tensions in Ukraine. The Information Technology sector weighed heavily on markets, after cybersecurity stocks Fortinet (-0.6%) and CrowdStrike (-3.2%) closed lower, while Meta Platforms (-2.0%) and Netflix (-2.3%) were also key detractors. Online platform Shopify plunged 16.0%, to its lowest level in nearly two years, after the company warned in its fourth quarter earnings report that revenue growth will slow in 2022. On the other hand, online retailer Amazon outperformed the market, up 1.0%. By the close of trade, the S&P 500 edged 0.1% higher, while the NASDAQ (-0.1%) and Dow Jones (-0.2%) weakened.
CNIS Perspective
Early in the pandemic, when the Australian economy plunged into lockdown, there were widespread concerns that both personal and corporate insolvencies would spike sharply.
However, as a result of temporary relief measures introduced in March 2020, both personal and corporate insolvencies fell to record lows. This is despite Australia experiencing the sharpest GDP contraction in history. GDP growth tipped into negative territory over the March quarter of 2020 and the economy experienced a technical recession in the June quarter, after GDP plunged a whopping 6.8%.
It has now been just over a year since temporary COVID-19 insolvency relief expired, yet both corporate and personal insolvency rates remain low. As of December 2021, corporate insolvencies were 43.9% below pre-pandemic levels, while personal insolvencies were 54.4% lower.
Looking forward, strong growth in consumer spending, supported by large household saving buffers should continue to underpin the economy. This is welcome news for businesses, particularly those hardest hit by the pandemic, like hospitality and tourism. Further, the balance sheets of businesses are in good shape and interest rates remain low. With this supportive environment, it is difficult to foresee a spike in insolvencies.
Should you wish to discuss this or any other investment related matter, please contact your Wealth Management Team on (02) 4928 8500.
Disclaimer
The material contained in this publication is the nature of the general comment only, and neither purports, nor is intended to be advice on any particular matter. Persons should not act nor rely upon any information contained in or implied by this publication without seeking appropriate professional advice which relates specifically to his/her particular circumstances. Cutcher & Neale Investment Services Pty Limited expressly disclaim all and any liability to any person, whether a client of Cutcher & Neale Investment Services Pty Limited or not, who acts or fails to act as a consequence of reliance upon the whole or any part of this publication.
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