Pre-Open Data
Key Data for the Week
- Monday – AUS – Retail Sales rose 0.1% in May, despite Victoria’s retail sales declining 1.5% due to extended COVID lockdowns.
- Tuesday – EUR – Consumer Confidence
Australian Market
The Australian sharemarket slumped to its worst day in over four weeks yesterday, as the possibility of interest rate increases worried investors. The benchmark ASX 200 fell 1.8%, heavily weakened by the Financials sector, which lost 3.4%.
Commonwealth Bank was the worst of the big four banks, down 5.4%, to dip back under $100 per share after releasing news that it will be selling its general insurance business. Of the other banks, ANZ fell 3.1%, while Westpac and NAB shed 2.7% and 1.7% respectively.
Losses were also seen in the Materials sector following a weakening in the price of gold, iron ore and copper. As a result, BHP shed 2.0%, while Fortescue Metals and Rio Tinto lost 2.7% and 2.8% respectively. Copper miners also felt the pressure of the market wide sell-off; OZ Minerals conceded 1.4% and Aeris Resources slipped 5.0%.
The Heath Care sector also lost ground as market leader, CSL, slipped 0.2%. Sonic Healthcare and Australian Clinical Labs shed 0.7% and 0.8% respectively, while Ramsay Health Care bucked the downward trend to close up 1.5%.
The Australian futures market points to a 1.23% gain today, driven by stronger overseas markets.
Overseas Markets
European sharemarkets closed higher on Monday as the pan-European STOXX 600 index posted its best day in three weeks. The automaker industry provided the biggest improvements, as Volkswagen added 3.8% and BMW rose 2.4%. Gains were also seen in the Consumer Staples sector, as Tesco and Sainsbury’s added 1.7% and 3.8% respectively, while Morrison’s soared 27.9% after rejecting an offer from Clayton, Dubilier & Rice.
US sharemarkets rose sharply on Monday, led by the Dow’s strongest session in over three months. All 11 sectors on the S&P 500 closed higher, with the Energy sector the best performer, up 4.3%. Gains were seen in the Information Technology sector, as Microsoft added 1.2% to reach an all-time high, while Apple and Alphabet lifted 1.4% and 0.7% respectively.
By the close of trade, the Dow Jones lifted 1.8% and the NASDAQ added 0.8%, while the S&P 500 rose 1.4%.
CNIS Perspective
It’s going to be a term we will hear more often over coming years, and it relates to how equity markets will react to higher interest rates, which appears more and more likely.
‘Taper tantrum’ refers to the extent equity markets sell-off as they react to higher interest rates.
It’s a fear of ‘taper tantrum’ that has seen central banks establish calendar-based guidance for monetary policy, which will provide regular market guidance that should placate equity market fears of rampant higher interest rates, that could see valuations tumble and unnerve the economic rebound and recovery.
This allows the market to forecast the likelihood of interest rate hikes in the near future, currently 0% chance of rate hikes in 2021 or most of 2022 for developed markets, with 2023 viewed as the anticipated time for lift off.
Between now and then there will be plenty of market massaging to ensure the risks of ‘taper tantrum’ are minimised.
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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