Pre-Open Data
Key Data for the Week
Australian Market
The Australian sharemarket ended positively on Wednesday, up 0.3%, despite a weak early session which saw the ASX 200 down 0.8% at one point. The tumultuous open was led by a poor performance from international markets on Tuesday night, as investors assessed the impact of Russian trade sanctions.
The local sharemarket was propelled higher by the Energy (4.9%) and Materials (3.0%) sectors, after the price of oil and iron ore both jumped between 4-5%. Energy prices spiked as supply concerns surfaced, given the geopolitical situation in Ukraine and trade sanctions imposed on Russia, one of the world’s major energy exporters. Key contributors included Woodside Petroleum (6.1%) and Santos (6.2%), alongside mining heavyweights Rio Tinto (4.6%) and Fortescue Metals (4.7%). BHP also made modest gains, up 3.8%, and now accounts for ~10% of the ASX 200 index, consequent to its consolidated listing in Australia and recent share price appreciation.
On the other hand, the session’s main detractors included the Financials (-1.4%) and REITs (-1.2%) sectors. All four major banks weakened, led by ANZ (-2.2%) and followed by Westpac (-1.7%), NAB (-1.3%) and Commonwealth Bank (-0.1%). Macquarie Group (-1.9%) and Australian Ethical Investment (-3.6%) also weakened. Notable movers in the REITs sector included Scentre Group (-2.0%), Charter Hall Group (-2.1%) and Stockland (-1.4%).
The Australian futures market points to a 0.96% increase today.
Overseas Markets
European sharemarkets similarly finished higher, despite a choppy session earlier in the day. A surge in energy and commodity prices boosted their related stocks, after investors grappled with the impact of supply disruptions as a result of Russian trade sanctions. Miners gained 2.3% as iron ore, copper and aluminium prices surged. Key performers in the session included BP (5.1%) and London listed Rio Tinto (3.4%). By the close of trade, the STOXX Europe 600 closed 0.9% higher, while the UK FTSE 100 and German DAX rose 1.4% and 0.7% respectively.
US sharemarkets advanced on Wednesday, led by gains made in the Financials (2.6%), Materials (2.2%) and Energy (2.2%) sectors. Banking stocks were boosted by a statement made by Federal Reserve Chairman Jerome Powell, who reaffirmed he will push for a 25 basis point rate hike this month, despite uncertainty linked to Russia’s invasion of Ukraine. Consequently, the yield on the US 10-year note rose 13 basis points to 1.85%, with Charles Schwab Corporation (5.1%) a key benefactor of the news. The Information Technology (2.2%) sector also performed well, after Microsoft (1.8%), NVIDIA (3.2%) and Meta Platforms (2.3%) rose, alongside cybersecurity stocks Fortinet and CrowdStrike, which both gained ~2.1%. By the close of trade, the S&P 500, NASDAQ and Dow Jones all closed between 1.6-1.9% higher.
CNIS Perspective
The Australian economy bounced back strongly in the final quarter of 2021. What is clear is that the Australian economy is getting better at dealing with challenges. In the December quarter, GDP grew 3.4%, after contracting 1.9% in the September quarter.
The recovery at the end of 2021 meant the economic expansion for the calendar year printed at 4.2%, a very solid pace. The economy at the end of 2021 was 3.4% larger than prior to the pandemic level of December 2019.
The emergence from lockdown in the larger states of NSW and Victoria unleashed consumer spending with a vengeance, which helped fuel the December quarter GDP print. Consumer spending surged 6.3% in the quarter, the biggest spike in five quarters and taking consumption above pre-pandemic levels for the first time.
The Australian economy’s resilience has a lot to do with low interest rates and strong stimulus from the central bank and governments. These settings have helped the economy navigate the pandemic-related challenges.
Current conditions warrant the RBA raising the cash rate, but the RBA also needs to take a forward-looking approach and consider what geopolitics mean for the global and domestic economy.
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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