Pre-Open Data
Key Data for the Week
- Wednesday – EUR – Consumer Confidence plunged to -18.7 in March, down from -8.8 in February.
- Thursday – AUS – Building Approvals
- Thursday – UK – Gross Domestic Product
- Thursday – EUR – Unemployment Rate
Australian Market
The Australian sharemarket closed up 0.7% on Wednesday, driven higher by the Information Technology (3.8%) sector. Most sectors finished in the green, with Energy (-0.8%) and Materials (-0.3) being the only detractors. However, it should be noted that these sectors have experienced significant growth recently, supported by elevated commodity prices. The Energy sector has gained 27.4% this calendar year-to-date, while the Materials sector has risen 10.6%.
Technology related stocks were key performers again on Wednesday, after WiseTech Global (1.3%), Xero (5.3%) and Block (6.2%) added to Tuesday’s gains. Four out of the five top performing stocks in the session were technology companies. The Information Technology sector has recovered strongly as of late, however, still remains down 15.3% this calendar year-to-date, as interest rate expectations continue to impact forecasted future earnings.
The Financials sector experienced modest gains, up 0.9%, after all major banks advanced. Westpac led the pack, ahead 0.9%, followed by NAB (0.8%), which reached a 5-year high, Commonwealth Bank (0.7%) and ANZ, which closed flat. Fund manager Australian Ethical Investment was a notable mover, up 4.4%.
Meanwhile, retail stocks enjoyed a boost from the anticipated impact of the Federal Budget released on Tuesday night. In particular, cash handouts and a cut to the fuel excise is hoped to promote discretionary spending. Kogan (5.0%), Harvey Norman (1.8%) and Wesfarmers (1.0%) were notable beneficiaries.
The Australian futures market points to a 0.13% increase today.
Overseas Markets
European sharemarkets were mixed on Wednesday, as the STOXX Europe 600 (-0.4%) and German DAX (-1.5%) lost ground. The German DAX weakened after the country’s headline inflation hit a 48 year high of 7.3% in March. Meanwhile, the UK FTSE 100 advanced 0.6%, pushed higher by Rio Tinto (4.0%) and BHP (4.4%). European commodity stocks were the strongest performers, with miners and the Energy sector up 2.4% and 3.3% respectively, supported by higher oil and metal prices. Eurozone consumer confidence plunged in March, which helped explain the 2.5% drop in travel and leisure stocks.
US sharemarkets lost ground on Wednesday, as investors considered the impact of the current inflationary environment on economic growth. A key concern being the flattening of the yield curve, which if inverted has historically been an indicator of economic recession. On the other hand, investors might be consoled by knowing that, historically, April has been the best month on average for US stocks since 1950. By the close of trade, the S&P 500 (-0.6%), NASDAQ (-1.2%) and Dow Jones (-0.2%) all closed lower. The Information Technology (-1.4%) and Consumer Discretionary (-1.5%) sectors were the main detractors, with NVIDIA (-3.4%), Netflix (-2.6%) and Amazon (-1.8%) being important movers.
CNIS Perspective
The Russian invasion of Ukraine has cast a dark cloud over global sentiment, but as equity markets react counterintuitively and continue to rise, another indicator is also showing signs of positivity.
The Volatility Index or “Fear Index” as it’s known, rises when fear of market losses rise and falls when fear abates or investors are less concerned about markets falling.
The drastic upheaval that featured at the start of 2022’s equity market has eased markedly.
Hopes of a peaceful resolution in the Ukraine are rising and optimism has grown that higher interest rates may not trigger an imminent recession.
The VIX confirms this, by falling 10 times out of the past 12 days, and is now hovering below its long term average.
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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