Weekly Market Update – 26 April 2021

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

 IndexChange%
All Ordinaries 7315-11-0.1%
S&P / ASX 2007061-3-0.1%
Property Trust Index1455-19-1.3%
Utilities Index6133-14-0.2%
Financials Index6223-4-0.1%
Materials Index16934+159+0.9%

Friday 23th April, closing values

 IndexChange%
U.S. S&P 5004180-5-0.1%
London’s FTSE6934-86-1.2%
Japan’s Nikkei29009-674-2.3%
Hang Seng29055+85+0.3%
China’s Shanghai3474+47+1.4%

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

Mark Johnson – Chairman of Investment Committee(03) 8825 4738
Guy Silbert – Investment Manager(03) 8825 4750

If you would like to discuss your situation, please speak to your adviser or email clientservices@primefinancial.com.au

Mark JohnsonT: (03) 8825 4738Cameron MorcherT: (03) 8825 4737
Livio Caiolfa T: (03) 8825 4748Michelle BromleyT: (03) 8825 4751
Marcus AingerT: (02) 9134 6292Nicole LewisT: (03) 8825 4734
Dylan CresswellT: (03) 8825 4707 Nicholas Miller T: (03) 8825 4722
Jarrod Rodda T: (03) 8825 4729

The information in this article contains general advice and is provided by Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this article. Please refer to the FSG (www.primefinancial.com.au/fsg) for contact information and information about remuneration and associations with product issuers. This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this article. Information in this article is current at the date of this article, and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.

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