Pre-Open Data
Key Data for the Week
- Monday – AUS – MI Inflation
- Monday – AUS – Retail Sales
- Tuesday – AUS – Dwelling Prices
- Tuesday – EUR – Markit Manufacturing PMI
- Wednesday – AUS – Gross Domestic Product
- Wednesday – EUR – Consumer Price Index
- Thursday – EUR – Unemployment Rate
- Thursday – AUS – Trade Balance
- Friday – US – Unemployment Rate
Australian Market
The Australian sharemarket closed slightly higher on Friday, with investors still cautious over the developing situation between Russia and Ukraine. Over the week, the ASX 200 closed down 3.1%.
The Information Technology sector rebounded after being heavily weakened earlier in the week. Afterpay’s parent company, Block, soared 32.5% after the company posted better-than-expected fourth quarter results. Artificial Intelligence provider, Appen, added 8.7%, while family location sharing app, Life360, closed the session 22.0% higher.
The big four banks were all lower, as the Financials sector dropped 1.0%. ANZ led the losses, down 2.2%, while Commonwealth Bank, Westpac and ANZ all ended between 0.9% and 1.6% lower. Fund manager, Magellan Financial Group, experienced further outflows of funds and fell 10.1%.
The Energy sector was mixed despite an increase in the price of oil. Woodside Petroleum dropped 0.5%, while Santos added 0.7%.
The Australian futures market points to a 2.33% gain today, driven by stronger overseas markets.
Overseas Markets
European sharemarkets rebounded on Friday, after they suffered heavy losses on Thursday. The Energy sector enjoyed gains; BP added 3.6% and Royal Dutch Shell lifted 2.7%. The Financials sector also rebounded; Barclays jumped 4.0% and Deutsche Bank added 5.5%, while BNP Paribas closed the session 3.0% higher. By the close of trade, the STOXX Europe 600 added 3.3% and the German DAX lifted 3.7%, while the UK’s FTSE 100 gained 3.9%.
US sharemarkets also closed higher on Friday, as all sectors saw gains. The Financials sector saw a significant rebound from the prior trading session, Goldman Sachs added 2.9%, JP Morgan lifted 2.4% and Wells Fargo was up 2.7%. The Information Technology sector also closed the session higher; Amazon added 1.6%, Alphabet lifted 1.4% and Microsoft rose 0.9%. By the close of trade, the Dow Jones added 2.5%, while the S&P 500 and NASDAQ lifted 2.2% and 1.6% respectively. Over the week, the Dow Jones dropped 0.7% and the S&P 500 closed relatively flat, while the NASDAQ gained 0.5%.
CNIS Perspective
A review of the valuation metrics of the sharemarket shows that value is returning to share prices. The volatility seen in markets since the start of the calendar year, mainly driven by rising interest rate expectations and the addition of geopolitical tensions, have played their part.
The S&P 500 Forward Price/Earnings ratio, a key valuation metric, has fallen below its five-year average of 18.6 for the first time since 15 April 2020, with the valuation metric falling from a recent peak of 21.4 on 3 January 2022, or a 13.5% move.
While reasonable valuation does seem to be present, the forward 12-month P/E ratio of 18.5 is still well above the lowest P/E ratio of the past nine years of 13.1 recorded on 23 March 2020, the bottom of the market during the COVID sell-off.
While most market sectors are trading at, or just below, their 5-year average, one standout is worth noting, the Energy sector.
The Energy sector is trading at a valuation 72% above its average, as constrains for oil and gas boost the sector’s value.
Should you wish to discuss this or any other investment related matter, please contact your Wealth Management Team on (02) 4928 8500.
Disclaimer
The material contained in this publication is the nature of the general comment only, and neither purports, nor is intended to be advice on any particular matter. Persons should not act nor rely upon any information contained in or implied by this publication without seeking appropriate professional advice which relates specifically to his/her particular circumstances. Cutcher & Neale Investment Services Pty Limited expressly disclaim all and any liability to any person, whether a client of Cutcher & Neale Investment Services Pty Limited or not, who acts or fails to act as a consequence of reliance upon the whole or any part of this publication.
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