Pre-Open Data
Key Data for the Week
- Wednesday – EUR – Consumer Confidence was firm in September, edging slightly higher to 117.8.
- Thursday – UK – Gross Domestic Product
- Thursday – EUR – Consumer Price Index
- Thursday – EUR – Unemployment Rate
Australian Market
The Australian sharemarket declined 1.1% on Wednesday, close to a four month low, as concerns around US interest rates and inflation rise. Most sectors closed down, except the more defensive Consumer Staples (0.1%) and Utilities (0.2%) sectors, which closed relatively flat.
The Energy sector’s recent momentum, caused by higher oil, gas and coal prices, was halted yesterday, as it finished 1.8% lower. The Information Technology sector (-2.4%) was another weak performer, dragged down by its main constituent, Afterpay, which lost 4.2%. Similarly, Health Care’s titan, CSL Limited (-2.6%), weighed on the sector, which conceded 1.9%.
The Financials sector gave up 1.1%, with all of the major banks in the red. Commonwealth Bank led losses, down 1.3%, while NAB, Westpac and ANZ shed 0.9%, 0.6% and 0.5% respectively. Other notable financial stocks which lost ground included Macquarie Bank Group (-1.7%) and Magellan Financial Group (-2.2%).
The major miners continued to struggle amid weakened iron ore prices. BHP lost the most, down 1.3%, with Rio Tinto and Fortescue Metals Group also lower, off 0.6% and 0.5% respectively.
The Australian futures point to a 0.32% increase today.
Overseas Markets
European sharemarkets recovered on Wednesday as the STOXX Europe 600 gained 0.6%, the German DAX rose 0.8% and the UK FTSE 100 climbed 1.1%. This followed one of the worst routs this year experienced on Tuesday, as ongoing concerns over growth and inflation caused investors to rotate from cyclical technology stocks toward more defensive health care stocks. One key standout yesterday was British pharmaceutical manufacturer, AstraZeneca, which jumped 4.2%, after its $500 million takeover of Caelum Biosciences.
US sharemarkets were mixed overnight, as investors considered the Fed’s commentary around the tension between high inflation and a high unemployment level. The S&P 500 gained between 0.2%, while the NASDAQ lost 0.2%. Most sectors closed ahead and, again, investors opted to rotate toward the more defensive Utilities (1.3%), Consumer Staples (0.9%) and Health Care (0.8%) sectors. A key mover included aerospace manufacturer, Boeing, which gained 3.2%.
CNIS Perspective
No one wants to be reminded of 2008 and the GFC, but similarities between then and now have recently been raised.
Fears the Evergrande Chinese property developer would default on its debt repayment obligations, raised claims that it could end up being another Lehman’s moment.
The bankruptcy of Lehman Brothers in 2008, due to a collapse in property fuelled debt markets was the catalyst for the GFC sell-off.
2008 was also a period when US banks were less regulated, which was largely to blame for the excesses Lehman’s, and the US Financials sector, exploited. That sparked the introduction of a number of policies that restricted bank lending and imposed more stringent tests on the financial stability of the banks and the Financials sector.
As cycles tend to go, these policies and restrictions have since been eased and policies are now essentially back in the same position as 2008.
As US Federal Reserve Jerome Powell nears the end of his first term as its chair, and seeks a second, calls for a reintroduction of tighter banking regulations as fears are growing of a repeat of 2008.
No one wants another 2008, but there is an eerie resemblance to it growing.
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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