Pre-Open Data
Key Data for the Week
- Wednesday – US – FOMC Meeting showed all participants agreed that a 0.5% rate hike was appropriate and most judged that further 0.5% hikes will be appropriate at the next couple of meetings.
- Thursday – US – Gross Domestic Product
Australian Market
The Australian sharemarket added 0.4% on Wednesday, despite a mixed lead from international markets on Tuesday night. Most sectors advanced, except for the Information Technology (-3.0%), Consumer Discretionary (-0.6%) and Health Care (-0.3%) sectors. Key movers in those sectors included Computershare (-4.8%), Aristocrat Leisure (-2.2%) and Fisher & Paykel Healthcare (-2.3%).
The Consumer Staples sector was the primary contributor to performance, up 1.5%, led by index heavyweights Woolworths (1.9%), Coles (2.0%) and Metcash (2.1%). Costa Group Holdings was another major winner, up 8.6%, after the company announced earnings would likely be $5 million higher in the 2022 calendar year. Although, the company also disclosed that net profit would likely slip $6.4 million, however, this was to be expected given global cost pressures.
Other notable contributors in yesterday’s session included gold miners, after the price of the precious metal jumped 1.0% on Tuesday night. Major beneficiaries included Perseus Mining (4.5%), Evolution Mining (3.5%) and Orica (3.5%).
Banks also performed well, as the Financials sector broadly gained 0.8%, following a lift in US treasury yields and a hike in the New Zealand cash rate. All major banks advanced, led by NAB (1.8%), followed by Westpac (1.4%), Commonwealth Bank (1.0%) and ANZ (1.0%).
The Australian futures market points to a relatively flat open today, up 0.18%.
Overseas Markets
European sharemarkets were firmer on Wednesday, reinforced by broad gains in the Banks (1.1%), Materials (1.5%), Utilities (2.0%) and Energy (1.9%) sectors. In economic news, the German gross domestic product rose by 0.2% in 1Q 2022, which eased recession concerns. Other notable movers in the session included HelloFresh (4.8%) and wind power developer Ørsted (3.3%). By the close of trade, the STOXX Europe 600, German DAX and UK FTSE 100 all advanced between 0.5%-0.6%.
US sharemarkets also finished higher on Wednesday, after investors digested the minutes made available from the last Federal Reserve meeting, which affirmed expectations for a 0.5% rate rise in June. All sectors advanced, except for Utilities (-0.1%) and the Health Care sector, which was relatively flat. Gains were led by Consumer Discretionary (2.8%) stocks, although the Information Technology sector also performed well, up 1.2%, led higher by Netflix (4.2%), NVIDIA (5.1%) and Meta Platforms (1.4%). Other key performers in the session included Tesla (4.9%) and Amazon (2.6%). By the close of trade, the Dow Jones added 0.6%, the S&P 500 rose 1.0% and the NASDAQ advanced 1.5%.
CNIS Perspective
Hopefully it’s a 2022 equity market recovery indicator similar to 2020, but US corporate insiders, whose purchases correctly signalled the bear market bottom in 2020, are back buying. More than 1,200 US corporate executives and officers have snapped up shares in their own firms in May, which is poised to exceed the March 2020 level that marked the pandemic trough two years ago.
The success of ‘dip buying’ now depends on the level of faith put into expected earnings. The S&P 500 index is currently trading at roughly 16 times earnings, which is relatively inexpensive by historical standards. The assumption is that corporate executives have a hands on feeling of how their company is travelling, and therefore are confident with earnings outcomes.
US companies have announced plans to purchase US$666 billion of their own shares since January, 19% above the intended total at this time last year. While this pocket of optimism is encouraging, the broader prevailing sentiment appears that the worst may not be over.
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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