Pre-Open Data
Key Data for the Week
- Thursday – AUS – Trade Balance year on year was a record surplus of $136 billion in May, to extend consecutive monthly trade surpluses to 53.
- Thursday – US – Trade Balance deficit improved from US$86.7 billion to US$85.5 billion in May.
- Friday – US – Unemployment Rate
Australian Market
The Australian sharemarket firmed 0.8% on Thursday, after the Materials (2.5%) sector rallied to partly offset losses made yesterday. Notable contributors included BHP (3.1%), Rio Tinto (4.1%) and Mineral Resources (4.5%). Unlike the Materials sector, the Energy sector did not recoup Thursday’s losses, as the sector finished flat after mixed performances.
The Consumer Discretionary (1.3%) and Financials (0.9%) sectors were the other main contributors to Thursday’s performance. Key movers included Wesfarmers (1.4%), Flight Centre Travel Group (2.2%) and JB Hi-Fi (1.5%). The major banks also performed modestly, as ANZ (1.8%), Commonwealth Bank (1.2%) and Westpac (0.8%) posted respectable gains, while NAB was flat. Fund managers Australian Ethical Investment (4.2%) and Magellan Financial Group (2.9%) also advanced.
The Industrials (-0.8%) and Information Technology (-0.5%) sectors were the primary laggards, led lower by sector heavyweights Brambles (-2.7%) and Computershare (-2.1%).
In company news, Link Group jumped 6.3% after Dye & Durham increased their takeover offer price to $4.70 per share. This followed after Link rejected a reduced offer of $4.30 this week, which was lower than the initial offer of $5.50 made in December.
The Australian futures market points to a 0.75% increase today.
Overseas Markets
European sharemarkets advanced on Thursday, led higher by commodity related stocks, as oil and metal prices rebounded. Miners added 5.4%, the Energy sector rose 4.1% and the Banks sector was up 3.4%. Notable movers included Anglo American (7.3%), BP (4.5%) and Barclays (3.3%). By the close of trade, the STOXX Europe 600 and German DAX jumped ~2.0%, while the UK FTSE 100 added 1.1%.
US sharemarkets were also firmer on Thursday, as all sectors were in the green except Utilities (-0.1%), which was relatively flat. The Energy sector led gains, up 3.5%, followed by the Consumer Discretionary (2.5%) and Information Technology (2.1%) sectors. Strong reported earnings from Samsung boosted chip related stocks like Intel (3.1%), NVIDIA (4.8%) and Taiwan Semiconductor Manufacturing Company (6.7%). By the close of trade, the S&P 500 rose 1.5%, the Dow Jones added 1.1% and the NASDAQ jumped 2.3%.
CNIS Perspective
The below chart speaks a thousand words. The Global Purchasing Managers Index (PMI) indicators show the comparison between inventories and backlog of orders.
You can see over the past two years backlogs have far exceeded inventory. This supply constraint has led to the significant rise in inflation the world has been dealing with.
However, the most recent reading shows the PMI backlogs indicator falling to the lowest level in almost two years, meanwhile inventories are surging to record levels.
A large part of the slump in backlogs likely reflects simply working through the impacted supply chains, reopening, easing of port congestion and factories returning to full capacity.
However, the induction of consumer demand destruction forced on by central banks raising rates and reducing stimulus in the market can’t go without mention as playing its part.
Central banks will be focusing on charts like this for the remainder of the year, with the expectation of supply led inflation easing, as inventories begin to pile up and factory orders weaken. The hope is that it takes the sting out of inflation swiftly, which is exactly what central banks have been looking to achieve.
Should you wish to discuss this or any other investment related matter, please contact your Wealth Management Team on (02) 4928 8500.
Disclaimer
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