Pre-Open Data
Key Data for the Week
- Monday – EUR – Money Supply Growth accelerated, up 7.9% over the year to August.
- Tuesday – AUS – Retail Sales
- Tuesday – AUS – ANZ Business Confidence
- Tuesday – US – Housing Price Index
Australian Market
The Australian sharemarket gained 0.6% yesterday. Investor optimism was lifted by the release of roadmaps out of COVID lockdowns for both NSW and Victoria.
Travel stocks soared in response to the plans to lift lockdowns. Flight Centre Travel Group was the best performer and added 7.5%, while Webjet and Qantas lifted 5.2% and 2.8% respectively. The Industrials sector finished 0.5% higher as the airports were mixed; Sydney Airport rose 0.1% and Auckland International Airport lost 0.5%.
The Financials sector added 1.5%, with Commonwealth Bank the best performer of the big four, up 2.8%. ANZ was the next best and rose 1.3%, while NAB and ANZ both lifted 0.8%. Fund managers enjoyed gains, as Challenger jumped 2.9% and Magellan Financial Group added 1.0%.
A jump in oil prices resulted in a 1.8% gain in the Energy sector. Woodside Petroleum jumped 3.2%, while Santos and Beach Energy climbed 2.0% and 4.2% respectively.
The Australian futures market points to a 0.57% decline today.
Overseas Markets
European sharemarkets were mixed overnight, as gains in the Financials and Energy sectors were overshadowed by weaker technology stocks. All major oil providers enjoyed gains; Royal Dutch Shell lifted 4.8%, TotalEnergies added 3.4% and BP jumped 3.2%. By the close of the session, the UK’s FTSE 100 rose 0.2% and the German DAX added 0.3%, while the STOXX Europe 600 slipped 0.2%.
US sharemarkets were also mixed on Monday, as rising Treasury yields weighed on the Information Technology sector. Microsoft lost 1.7% and Apple dropped 1.1%, while Alphabet slipped 0.8%. The Financials sector rose; Bank of America lifted 2.7%, while Goldman Sachs and JPMorgan Chase both added 2.4%.
By the close of trade, the Dow Jones closed up 0.2%, while the NASDAQ lost 0.5% and the S&P 500 conceded 0.3%.
CNIS Perspective
BHP recently announced they intend to consolidate their dual listed ASX and London FTSE stock on the Australian exchange. The unification vote, scheduled for the first half of 2022, would see ~$80 billion of new BHP shares quoted on the ASX.
If successful, BHP will move from third position, to become Australia’s largest company listed on the ASX. This will mean that BHP’s index weight will likely go up to over 10%, surpassing Commonwealth Bank as the largest current index weight of 8.8%.
BHP’s greater weight in the ASX 200 will mean the index is going to become even more concentrated in resource shares.
From an Australian investors point of view, this is going to make the index a much more volatile and cyclical market.
Since 1 August, BHP’s share price has given up 24%, forced lower by a dramatic fall in the iron ore price, which has also brought down other large index constituents Fortescue Metals and Rio Tinto.
This has had an impact on the ASX over the same time period, but if the BHP vote attains 75% shareholder approval, investors purchasing ASX 200 tracking exchange traded funds (ETFs) are going to be even more vulnerable to a downturn in the Financials or Materials sector.
These two sectors would comprise roughly 52% of the ASX 200 index, governing over half of the returns of the index, making investment management on the Australian market even more crucial.
Should you wish to discuss this or any other investment related matter, please contact your Investment Services 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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