Market Insights

1st April 2019

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Major Market Announcements

  • U.S. stocks ended the final trading day of the first quarter on a strong note on Friday and the S&P 500 posted its best quarterly gain since 2009, boosted by optimism over the latest round of trade talks between the United States and China.
  • In Australia over the coming week, the handing down of the Federal Budget and the Reserve Bank’s interest rate decision both dominate. Tier-1 data includes retail and international trade, home prices and business confidence. US reports on jobs and retail sales are the key interest points in the coming week. Manufacturing and services activity gauges in the US and China will also be keenly observed.
  • LNG prices are forecast to drop by a third in the coming months following a steep decline in the oil price, hitting the earnings of some of Australia’s biggest energy companies. Australian gas prices have come off historic highs of about $20 a gigajoule caused by a combination of high oil prices and a lack of domestic supply. Australia is forecast to overtake Qatar to become the world’s top LNG exporter this year, shipping around 82 million tonnes of LNG in 2019. 
  • Federal Labor will introduce its changes to negative gearing and capital gains tax by January 1 next year if the party wins the May election, but shadow treasurer Chris Bowen does not expect a surge in property sales ahead of the overhaul.
  • The negative gearing reforms will not apply to newly built homes and existing investment properties, while the capital gains tax discount will be halved for investments entered into after January 1.
    Mr Bowen said the property tax changes would raise $2.9 billion over the forward estimates.
    “If you already use negative gearing, nothing changes. It’s not retrospective. And you can still use it for new houses,” he said in a statement on Friday.
  • Rio Tinto has declared force majeure to some of its iron ore customers after cyclone damage halted shipping from its Cape Lambert A terminal in the Pilbara. It is understood high winds and big waves from cyclone Veronica earlier this week combined with a spring high tide to damage the terminal. Rio has declined to reveal the nature of the damage, exactly what caused it or when it expects to resume normal operations.

Market Update

Investors initially shrugged off record low housing-credit growth but the Australian sharemarket failed to hold above the 6200 level and it dropped to close marginally firmer.

The S&P-ASX 200 index reached a 0.6 per cent gain in afternoon trade, but it sold off again to close up just 4.6 points, or 0.07 per cent, at 6180.7 finishing up 9.4 per cent for the March-quarter as investors turned to healthcare stocks and miners for quarter-end window dressing.

The major banks had a solid session despite February credit growth slowing to just 4.2 per cent over the past year, with the three-month annualised rating falling to 2.9 per cent as the decline in house prices reduced demand for mortgages.

UBS economist George Tharenou said of note was that credit from the big four banks hit a record low of 2.8 per cent year-on-year, but UBS’ estimated the rest of the system was “still booming” at about 10 per cent growth.

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Disclaimer: The advice provided is general advice only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs. Where quoted, past performance is not indicative of future performance.

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