Pre-Open Data
Key Data for the Week
- Tuesday – US – Consumer Confidence fell to 117.2 in May from 117.5 in April.
- Tuesday – US – New Home Sales slipped 5.9% to an annual rate of 863,000.
- Wednesday – AUS – Construction Work Done Q1
Australian Market
The Australian sharemarket gained 1.0% on Tuesday, led higher by the Materials sector. Despite the price of iron ore declining, the sector bounced off the back of four consecutive sessions of losses; BHP rose 1.3%, while Rio Tinto and Fortescue Metals both added 1.6%.
The Financials sector also enjoyed gains as all big four banks finished higher. NAB and Westpac both added 0.9%, while ANZ lifted 1.0%. Commonwealth Bank hit a record high for the second consecutive day and closed the session up 0.9%. Australian fund managers also produced solid performances; Australian Ethical Investment rose 2.6% and Magellan Financial Group added 0.7%.
Performances in the Industrials sector were mixed as a new cluster of COVID-19 cases in Melbourne sparked fresh lockdown fears; Qantas shed 0.2%, while Sydney Airport added 0.5%. Auckland International Airport rose 0.6% despite announcing they have suspended quarantine free travel from Victoria.
The Information Technology sector added 0.3% as buy-now-pay-later favourite, Afterpay, lifted 0.9%. Airtasker, an online marketplace for local services, soared 12.0%, after emerging from a trading halt following the announcement that they would be expanding into the US.
The Australian futures market points to a 0.49% fall today.
Overseas Markets
European sharemarkets closed relatively flat on Tuesday after concerns of the Chinese Government’s control over commodity prices overshadowed a rally in the Information Technology sector. The German DAX hit a record high during the day’s trade after news broke that Vonovia, Europe’s largest residential property group, would be acquiring its rival, Deutsche Wohnen for €18 billion. The STOXX Europe 600 ended the session flat.
US sharemarkets closed lower overnight, weakened by the Energy sector. Exxon Mobil and BP suffered the largest losses, down 2.3% and 2.7% respectively, while Tesla shed 0.3%. Gains were seen in the Industrials sector as United Airlines issued positive air traffic estimates and rose 1.5%.
By the close of the session, the Dow Jones and the S&P 500 fell 0.2%, while the NASDAQ closed flat.
CNIS Perspective
For the first time in many years, the global supply of debt with a negative yield is in meaningful decline. It has been a strange concept to wrap your head around, where investors pay borrowers to deposit money with them.
Europe saw the subzero bond issuance start in 2014, then spiked in 2016 to become an everyday occurrence that we still see play out today.
Investors have been willing to accept this loss in exchange for the relative safety of the borrower, in the majority of cases, Governments.
As much as 75% of eurozone Government bonds had negative yields last year, boosted by expectations that the European Central Bank stimulus would remain in place for some time, keeping rates down.
However, the pool of European bonds with negative yields has started to shrink of late, down to 60% at the end of April and continuing to decline in May. As enthusiasm of the reopening of Europe begins to take shape, and for the first time in decades, a pick-up in inflation may cause the yield on bonds to return to positive territory.
It may be some time before we see a return to a normal positive yielding bond market in Europe, but we are starting to see change, brought on by the aftermath of COVID related stimulus packages.
Should you wish to discuss this or any other investment related matter, please contact your Investment Services Team on (02) 4928 8500.
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