Cutcher | Insights and News

Morning Market Update - 19 May 2021

Written by Phillip Smith | 18 May 2021 11:56:17 PM

Pre-Open Data

Key Data for the Week

  • Tuesday – AUS – RBA Meeting Minutes showed policy settings were left unchanged.
  • Tuesday – EUR – Trade Balance contracted by 0.6% in the March quarter.
  • Tuesday – UK – Unemployment Rate fell to 4.8% from 4.9%.
  • Wednesday – AUS – Wage Price Index
  • Wednesday – UK – Consumer Price Index



Australian Market

The Australian sharemarket rose 0.6% on Tuesday, buoyed by gains in the Financials sector. ANZ was the best of the big four and closed 1.4% higher, while Westpac and NAB added 0.5% and 1.2% respectively. During the day’s trade, Commonwealth Bank reached a new peak of $98.84 before slipping towards the end of the session to close 0.1% lower.

A rise in the price of iron ore was enjoyed by the mining heavyweights and led the Materials sector 1.6% higher. Rio Tinto added 2.1%, Fortescue Metals climbed 2.0%, while South32 lifted 2.4% after increasing production forecasts in its full year outlook.

The Energy sector also rose 1.6%, with sector giant, Woodside Petroleum, lifting 2.1%. Santos added 1.6% and Beach Energy climbed 2.7%, while Paladin Energy soared 10.1% as the uranium market begins to attract more attention.

The Information Technology sector provided a 0.4% gain. Australian stock transfer company, Computershare, rose 4.2%, while artificial intelligence provider, Appen, added 1.0%. Buy-now-pay-later favourites finished the session higher, as Zip added 1.7% and Afterpay eked out a less than 0.1% gain. 

The Australian futures market points to a 1.1% fall today.

Overseas Markets

European sharemarkets climbed on Tuesday as the German DAX hit a record high during the day’s trade. The Travel and Leisure sector led the gains as Air France added 2.3% and Deutsche Lufthansa lifted 2.8%. The broad-based pan-European STOXX 600 improved 0.2%.

US sharemarkets finished the session weaker, dragged down by the Information Technology sector with sector giants, Apple and Amazon, shedding 1.1% and 1.2% respectively. AT&T lost 5.8% after announcing that it would cut its dividend payout ratio in order to sign a US$43 billion deal with Discovery Inc.

For the week, the Dow Jones and the S&P 500 slipped 0.8%, while the NASDAQ lost 0.6%.

CNIS Perspective

Buybacks announced by US-listed companies in the first four months of the year reached the highest level on record, going back over two decades.

The main drivers of this increase are excess cash on company balance sheets and positive business and consumer sentiment on the back of a strong rebound in financial performance.

While much more common in the US, due to less favourable tax treatments on dividends when compared to Australia, companies in the ASX are also getting in on the act this year, with approximately $11 billion announced for purchase by companies in the second half of this financial year.  

We are likely to see even more share buybacks announced if Australian banks decide to return excess capital to shareholders. Banks are currently sitting on huge cash balances, as they have been holding more money for bad loans provisions over the past 12 months, which fortunately hasn’t eventuated.

Time will tell how these excess cash balances are spent by the big four, but higher dividends or share buybacks look increasingly likely in what is a good sign for Australian investors.

Should you wish to discuss this or any other investment related matter, please contact your Investment Services 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.

Cutcher & Neale Investment Services Pty Limited ABN 38 107 536 783 is a Corporate Authorised Representative of Cutcher & Neale Financial Services Pty Ltd ABN 22 160 682 879 AFSL 433814.