Pre-Open Data
Key Data for the Week
Australian Market
The Australian sharemarket eased 0.3% on Wednesday, to break a four-day winning streak. Materials was the weakest performing sector, down 1.1%, followed by Health Care and REITs, which fell 1.0% and 0.9% respectively.
Travel stocks weakened following new COVID-19 cases in Melbourne. Airlines Qantas and Regional Express Holdings gave up 0.9% and 3.1% respectively, while travel agencies Helloworld Travel and Flight Centre slipped 1.6% and 1.3% respectively.
A decline in the price of iron ore weighed on the Materials sector. Mining heavyweights posted losses; BHP gave up 2.4% and Fortescue Metals lost 2.3%, while Rio Tinto shed 2.2%. However, gold miners outperformed; Northern Star gained 2.6% and Evolution Mining added 1.9%, while Newcrest Mining rose 1.4%.
There were mixed performances among the major banks; NAB fell 0.2% and Commonwealth Bank reached $100 per share for the first time before retreating to close 0.1% lower, while ANZ and Westpac lifted 0.2% and 0.3% respectively. Asset managers weakened; Challenger fell 0.2% and Australian Ethical Investment slipped 0.1%, however, Magellan Financial Group bucked the trend to gain 2.2%.
The Australian futures market points to a 0.04% rise today.
Overseas Markets
European sharemarkets closed relatively flat overnight. The Financials sector eased; Lloyds Bank slipped 1.3% and Deutsche Bank fell 1.2%, while Barclays lost 0.4%. Travel and leisure stocks posted gains; International Airlines Group added 0.5% and Trainline rose 0.3%, while easyJet lifted 0.1%. UK retailer Marks & Spencer climbed 8.5% after the company reported earnings would recover from an 88% fall in full-year profit, following strong sales at the start of 2021. By the close of trade, the STOXX Europe 600 and UK FTSE 100 both closed flat, while the German DAX slipped 0.1%.
US sharemarkets advanced on Wednesday as comments by the US Federal Reserve addressed concerns regarding rising inflation. Technology shares lifted; Alphabet gained 1.0% and Spotify lifted 0.7%, while CrowdStrike added 3.3%. Amazon closed 0.2% higher after the e-commerce giant announced plans to buy MGM Studios for US$8.45 billion. By the close of trade, the NASDAQ gained 0.6% and the S&P 500 rose 0.2%, while the Dow Jones closed flat.
CNIS Perspective
The talk of low interest and stimulatory policy eventually leading to inflation immediately triggers the response of, “what about Japan?”.
In the early 90s Japan saw its real estate and equity markets collapse, which led their central bank, Bank of Japan (BoJ) into a decades long period of expansionary monetary policy, with interest rates remaining below 1% since the mid-1990s, quantitative easing since 2001 and various other asset purchase plans.
There have been some extraordinary outcomes from all this, notably the BoJ now owns over 75% of Japanese ETFs and is the largest individual shareholder in Japan.
Despite these stimulatory measures, the Japanese economy has never quite recovered, with no periods of sustained inflation above 2%, and GDP still remaining below its 1995 peak.
If Japan can’t stimulate inflation after all they have done, how can the US or other developed economies? Japan’s demographics, culture and productivity are all targeted as reasons why Japan may be an isolated case.
It may be isolated or it might be a precedent. Time will tell.
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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