Pre-Open Data
Key Data for the Week
- Monday – CHINA – Industrial Production fell 2.9% in April, which missed estimates of a 0.5% increase.
- Tuesday – EUR – Gross Domestic Product
- Tuesday – UK – ILO Unemployment Rate
- Tuesday – AUS – RBA Board Meeting Minutes
Australian Market
The Australian sharemarket extended gains for a second straight day yesterday, as it closed up 0.3%. Despite the increase, investors are still cautious as increasing interest rates, and China’s COVID lockdowns still pose risks to sharemarkets.
The Information Technology sector led the gains, as it added 2.1%. Afterpay’s parent company, Block, rose 3.8%, while artificial intelligence provider, Appen, closed the session 3.9% higher. Accounting software provider, Xero, lifted 4.4%, while Altium and Life360 were up 2.6% and 3.4% respectively.
All four of the major banks enjoyed gains, as the Financials sector rose 0.5%. Westpac was the best performer, up 1.6%, while ANZ, Commonwealth Bank and NAB all gained between 0.6% and 1.0%. Local fund managers were mixed; Australian Ethical Investment and Magellan Financial Group both lost 3.5%, while Challenger lifted 0.1%.
The Consumer Discretionary sector was relatively flat, as Wesfarmers dropped 0.6%, while Harvey Norman and JB Hi-Fi lost 0.7% and 0.8% respectively. Step One Clothing plummeted 56.3% after the company halved its earnings guidance as a result of increased costs.
The Australian futures market points to a 0.32% rise today.
Overseas Markets
European sharemarkets were mixed overnight, as losses among the Travel & Leisure and Information Technology sectors overshadowed gains in the Materials sector, which was buoyed by a 3.4% gain in Glencore. Lufthansa led the declines in the Travel & Leisure sector, down 3.0%, while International Consolidated Airlines dropped 1.2%. By the close of trade, the STOXX Europe 600 was relatively flat and the German DAX lost 0.5%, while the UK’s FTSE 100 added 0.6%.
US sharemarkets closed mostly lower on Monday, as weak economic data out of China weighed on investor sentiment. The major banks were lower; Goldman Sachs dropped 1.2%, while JP Morgan and Charles Schwab lost 0.8% and 2.4% respectively. The Information Technology also lost ground, as Alphabet slipped 1.5% and Apple conceded 1.1%.
By the close of trade, the Dow Jones lifted 0.1%, while the S&P 500 lost 0.4% and the NASDAQ dropped 1.2%.
CNIS Perspective
While markets are currently focused on peak inflation and uncertain interest rate outcomes, it’s often valuable to look back historically to see performance of markets under volatile market conditions.
Going back to 1957, or 65 years, a retracement of 15% or more for the US S&P 500 has been followed by positive returns in the ensuing 12 months in all but two occasions over the period.
While a useful guide, each situation is different and the results vary considerably, but history shows the vast majority of outcomes remain positive.
If we look at a key market value indicator, the Price to Earnings (P/E) ratio, the S&P 500 forward 12-month P/E ratio currently sits at 16.6.
This is now well below the five-year average of 18.6 and for the first time since early 2020, below the 10-year average of 16.9, showing value is beginning to return to the US index, as markets digest inflation and interest rate expectations.
Should you wish to discuss this or any other investment related matter, please contact your Wealth Management Team on (02) 4928 8500.
Disclaimer
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