Pre-Open Data
Key Data for the Week
Australian Market
The Australian sharemarket added 0.1% on Monday, with gains limited by concerns of a slowing Chinese economy. The Information Technology sector was the best performer in the day’s trade, adding 1.2% to rebound from a large decline last week. This was largely due to gains in accounting software provider Xero, which added 5.6%.
The Materials sector provided widespread gains, aided by increases in the price of gold. This led to Northern Star Resources lifting 6.6%, Evolution Mining adding 5.4% and Gold Road Resources climbing 4.5%. Fortescue Metals was the best of the mining giants, increasing 1.4%, while BHP eked out a less than 0.1% gain.
Gains were also seen in the Energy sector, which closed 1.1% higher. Oil producers Santos and Oil Search added 1.0% and 0.8% respectively, while Origin Energy lifted 0.5%.
Performances in the Financials sector were mixed; Commonwealth Bank was the only big four bank to record a gain at the close of the session, up 1.25%. In contrast, NAB lost 0.7%, ANZ conceded 0.4% and Westpac fell 0.3%.
The Australian futures market points to a 0.16% rise today.
Overseas Markets
European sharemarkets closed flat on Monday, as weakened Chinese economic data dampened optimism around the re-opening of the British economy. The Travel and Leisure sector was among the worst performers, down 2.3%, as new COVID-19 cases in Asia re-affirmed the belief that international travel still poses many risks. The broad based STOXX Europe 600 lost less than 0.1%.
US sharemarkets fell on Monday, with the Information Technology sector weighing on the indices as Microsoft lost 1.2%, Apple fell 0.9% and PayPal shed 0.8%. The Utilities and Telecommunications sectors both closed between 0.7% and 0.9% lower. By the close of trade, the Dow Jones lost 0.2%, the S&P 500 shed 0.3% and the NASDAQ fell 0.4%.
CNIS Perspective
Since CoreLogic house price data commenced in 1980, there have been recessions in the early 80s, 90s and 2020. The economic slowdown post-GFC was significant, but it didn’t trigger a technical recession.
During these times dwelling prices declined, with the recession of 1990 and GFC downturn recording falls of around 7.0%. The 2020 recession caused by COVID resulted in a smaller fall, but a recovery swifter than previous recessions and GFC.
Property prices post-COVID returned to their 2020 peak within eight months, while previous recessions and the GFC took between 18 to 24 months for prices to return to their pre-downturn peak.
The turnaround is due to a number of factors. The economy and labour market has rebounded much faster than other downturns and interest rates are at a record low.
On the supply side, the low level of housing stock is also helping to propel prices higher, with advertised listings more than 30% below their average in the five years before the pandemic.
The big question is - when will the regulators start applying the brakes?
It appears only a matter of time before limits are imposed on the lenders similar to 2015 and 2017, when a 10% limit was imposed on investor loan growth and a 30% limit on the share of interest only loans.
It’s never healthy for a market to run too hard, too fast and create a bubble. There’s obviously more strength in the property market in the short term, but the pace of growth has to slow if a bubble is to be avoided.
Should you wish to discuss this or any other investment related matter, please contact your Investment Services Team on (02) 4928 8500.
Disclaimer
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