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Markets remain flat with a big week to come

Global equity markets remained relatively flat last week, rising only 0.16% as represented by the MSCI World Index in AUD terms.  

Global equities took a sharp dive on Thursday post the Biden administration’s announcement to nearly double the capital gains tax for individuals earning more than $1 million. Though, most of the intraday losses were recovered the following day as investors realised the tax bill would be materially lower than Biden’s proposal should it be successfully passed through Congress.  

March quarterly earnings reports kick of this week in the US, with over 40% of the S&P 500’s market cap reporting this week alone.  

Tech behemoths such as Apple, Amazon, Alphabet (Google Inc), Microsoft and Facebook are set to report this week, and will ultimately decide the course of equity markets in the months to come.  

RBA Minutes

Minutes from the RBA once again confirmed the cash rate would remain at 0.10%.   

Overall, the discussion from the board reflected that the RBA believes Australia’s economy is recovering strongly from the pandemic, with GDP and job growth figures finally returning to pre-pandemic levels.   

Though, the bank commented that it was not satisfied with domestic wage growth, which had dropped off to a greater extent when compared to other countries.  

For reference, current domestic wage growth sits at a historical low of 1.2%, with the bank further re-affirming in its minutes that to reach its inflation target of 2-3%, wages would need to grow sustainably at levels of above 3%.  

The RBA which backed the wind-up of a JobKeeper, noted in the minutes that several forward-looking indicators such as job vacancies and advertisements broke that of pre-pandemic levels.   

New hiring was thought to at least offset a portion of the eventual job losses due to the end of the JobKeeper program, though the full impact of the subsidy’s termination is not yet fully understood and will remain unknown until several months down the track.  

Westpac Leading Index - lift in growth forecasts

Data out from Westpac’s Leading Index showed further promising signs for Australia’s economic outlook.   

The six-month annualised growth rate in the Westpac Leading Index climbed from 3% in February to 3.29% in March.  

The index, which is designed to compile nine underlying economic indicators to forecast the direction of the economic activity relative to the trend three to nine months in the future continues to signal an above trend growth throughout 2021.  

Alongside this, Westpac recently lifted its forecasted growth rate of 4.5% from 4.0% in 2021. This figure contrasts the RBA’s estimate of 3.5% set out in its Monetary Policy decision in early March.  

The change in growth forecast can be attributed to a strong increase in spending from consumers, with consumer confidence levels reaching their highest level since the rebound from the GFC in August of 2010.

ASX Weekly Wrap   

The benchmark S&P/ASX200 index closed up 5.3 points, or 0.08 per cent, to 7060.7 on Friday, but it was not enough to buoy the index to its fifth straight weekly rise.  

Despite being close to its record of 7197.2, markets were relatively sideways last week as investors mulled the prospectus of a renormalising economy, against lingering coronavirus concerns and rumoured changes to capital gains tax in the U.S. Materials however proved to be the best performing sector, rising close to 1% on the week.   

As oil prices slipped, energy quickly lead the largest losses on the ASX, with the sub index retreating –5.75% over the five days of trading. A flurry of disappointing quarterly earnings updates also dragged tech shares and other names, Kogan.com (KGN), Redbubble (RBL), Nuix (NXL) and Challenger (CGF) all falling sharply last week.

On a positive note, stocks with exposure to iron core continued to rise off the back of near historic prices in the commodity. Rio Tinto (RIO), Champion Iron (CIA) and Fortescue Metals Group (FMG) all enjoyed gains.  

Looking ahead

Monday 26th April 2021 – Friday 30th April 2021

• Monday: N/A
• Tuesday: US House Price Index (YoY and MoM)
• Wednesday: US Consumer Confidence, AU RBA Inflation Figures
• Thursday: US Federal Reserve Interest Rate Decision, US GDP Figures
• Friday: N/A

Friday 23th April, 5pm values

Friday 23th April, closing values

Key dividends

Monday 26th April 2021 – Friday 30th April 2021

• Monday: N/A
• Tuesday: Div Pay-Date – Vanguard US Total Share Market ETF (VTS)  
• Wednesday: Div Pay-Date – Brickworks Limits (BKW)
• Thursday: Div Pay-Date – Centuria Industrial REIT (CIP),  Centuria Office REIT (COF)
  Div Ex-Date – STW Group (WPP)
• Friday: Div Pay-Date – Coca-Cola Amatil (CCL), Cedar Woods Properties (CWP), James Hardie Industries (JHX)

Contact

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