Pre-Open Data
Key Data for the Week
- Thursday – EUR – Consumer Price Index surged 7.4% year on year in March.
- Friday – EUR – Markit Manufacturing
- Friday – UK – Retail Sales
- Friday – US - Markit Manufacturing
Australian Market
The Australian sharemarket rose 0.3% on Thursday, despite weak performances from the Information Technology (-2.6%) and Materials (-1.6%) sectors. Technology related stocks declined after poor results from their US peers on Wednesday night. Meanwhile, mining companies warned of labour shortages which concerned investors. Notable detractors included Xero (-2.5%), Block (-6.9%), BHP (-3.1%) and Rio Tinto (-1.6%).
All other sectors advanced, led by Industrials (2.2%) and REITs (2.0%). Brambles was a key contributor, up 8.0%, after it posted an 8% annual increase in sales revenue and upgraded its sales, profit and free cash flow forecasts. Meanwhile, real estate stocks experienced widespread gains, with index heavyweights Goodman Group, Scentre Group, Dexus and Stockland all ahead between 2.0-2.4%.
The Financials (1.1%) sector also performed well, led higher by Commonwealth Bank and NAB, both up 1.0%. The other major banks, Westpac (0.6%) and ANZ (0.3%), also advanced.
In other company news, BHP fell after it posted a 10% reduction in its copper production and a flat year on year change in its iron ore production. Zip Co slipped 4.6%, after it reported a 39% annual increase in revenue and a 20% rise in net bad debts, which concerned investors. Megaport dropped 21.6%, despite posting positive sales growth, as investors seemed more worried about its negative cashflow, which totalled $6.27 million.
The Australian futures market points to a 0.87% decrease today.
Overseas Markets
European sharemarkets rose on Thursday, as company earnings mostly offset concerns over higher inflation. In company news, Nestle (0.7%) and ABB (2.8%) advanced after positive earnings results, while Louis Vuitton (1.7%) was supported by forward guidance provided by chairman Bernard Arnault. The main detractors in the session were miners, after Anglo American slipped 8.8% on its report that first quarter production had fell 10% year on year. By the close of trade, the STOXX Europe 600 (0.3%) and German DAX (1.0%) advanced, while the UK FTSE 100 closed relatively flat.
US sharemarkets fell on Thursday, after Federal Reserve Chairman Jerome Powell signalled interest rates were poised to rise higher and fast. Consequently, the CBOE Volatility Index surged and all eleven sectors declined. The Energy (-3.1%), Communication Services (-2.4%) and Information Technology (-1.7%) sectors led losses. Technology related mega caps were key detractors, as Microsoft (-1.9%), Alphabet (-2.6%), Meta Platforms (-6.2%), Amazon (-3.7%) and Netflix (-3.5%) all fell. Meanwhile, renewable energy stocks like Enphase Energy (-12.3%) and SolarEdge Technologies (-9.8%) suffered, as NextEra Energy (-6.5%) announced delays of a number of its solar projects into 2023. By the close of trade, the S&P 500 (-1.5%), NASDAQ (-2.0%) and Dow Jones (-1.1%) all lost ground.
CNIS Perspective
Inflation continues to be the hot topic for financial markets, and last night’s statement from US Federal Reserve chair Jerome Powell indicated the need to “front-load” interest rate hikes. This will likely mean a number of 0.50% rate increases in the short-term, rather than the typical 0.25% increments.
As we wrote yesterday, this more aggressive ‘front-loading’ approach was adopted by New Zealand’s central bank last week and is aimed at containing inflation at a faster rate.
It is no surprise that we are structurally entering a higher inflation, higher interest rate environment. However, it would appear the Federal Reserve has lost sight and control of the shorter-term inflation spike and the need to act sooner rather than later, with Powell stating, “Our goal is to use our tools to get demand and supply back in sync, so that inflation moves down and does so without a slowdown that amounts to a recession”.
The good news is that the shorter-term inflation spike may have already started to peak, however, the Fed’s 2% target will remain a long way off forcing some agonising choices for the central bank over the remainder of 2022.
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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