Weekly Market Update – 07 June 2021

Markets surge higher on the back of strong data.

Encouraging data drove the Australian equity market higher last week with Q1 gross domestic product (GDP) coming in ahead of forecasts, whilst the RBA kept rates on hold and made no changes to its QE program in a sign of further support for the local economy.

Not only did the GDP figure beat recent upwardly revised expectations but Australia has now more than offset all of its previous lost output from the COVID-19 induced recession.

Supported by high levels of fiscal and monetary stimulus Australia now appears to be transitioning strongly from ‘recovery’ to ‘expansion’.

Having traded at an intraday high of 7197 in February last year the ASX200 this week climbed through 7300 to reset a new record high with GDP data, strong manufacturing data and further gains in the price of iron ore all supporting the local share market.

International equity markets rallied +0.3% as represented by the MSCI World Index in AUD terms.

The key data release from the US last week was May’s non-farm payrolls which saw 559,000 jobs added in May and subsequently drove the unemployment rate to 5.8%.

Expectations had been for the US economy to add around 650,000 jobs in May, so the data was slightly below forecasts, however, it was still well received given April’s slide in job creation to 278,000.

With almost half of all US states rolling off from unemployment welfare benefits over the course of the next month it is likely we may see some spikes in the unemployment rate in the medium term.

Similar to Australia’s JobKeeker program, these welfare payments having been keeping US citizens ‘employed’ throughout the pandemic thereby driving down the overall unemployment rate.

Hence, the cessation of these benefits has the potential to see some short-term volatility in employment data given the withdrawal of benefits forces the unemployed back to work into a rapidly tightening labour market.

However, in a further sign of encouragement for the US labour market last week’s jobless claims fell below 400,000 for the first time since the pandemic began.

Filings for unemployment benefits totalled 385,000, a decline from the previous week’s 405,000 and below estimates of 393,000. You have to go back to March 14, 2020 to find a week of fewer claims with the number peaking at more than 6.1m in early April as businesses shut to slow the spread of the virus.

However, as vaccinations continue to be rolled out and businesses have begun reopening and rehiring, the labour market outlook has and continues to improve with the Biden administration targeting an unemployment rate of 4.7% at year’s end.

A tightening and fuller labour market remains a catalyst for wage inflation which would in turn boost prices and subsequently drive inflation higher. However, we believe this is fundamentally next year’s story with the rest of the 2021 narrative likely to focus on the transition from recovery to expansion.  

US equities advanced +0.6% for the week following the jobs data.


Following a host of upgrades from the major banks which saw ANZ most bullish with a Q1 GDP forecast of 2.1% and Westpac (WBC) upgrading its forecast from 1.4% to 1.6%, March quarter GDP came in at 1.8%.

Prior to the upgrades, consensus had been for Q1 GDP figure of around 1.1% so this was well and truly a fantastic result. The figure wasn’t so strong that it stoked inflation fears or an earlier than anticipated easing to the RBAs QE program, but it wasn’t too weak to suggest the recovery was stagnating.

It was as they sometimes refer to – a goldilocks print – steady economic growth preventing a recession, but not too much growth that we risk overheating.

The March GDP figure took annual growth to 1.1%, nearly double forecasts of 0.6%. Further assisting the annual growth figure was an upwardly revised December figure which climbed to 3.2% from an original 3.1%.

The RBA held its monthly policy meeting last week and as expected left rates at 0.1% and announced no changes to its QE program or its yield curve control policy.

The RBA stated that “the global economy is continuing to recover and the outlook is for strong growth this year and next [but] the recovery remains uneven [with] some countries yet to contain the virus.”

Particularly pleasing is the forecast for growth continue with the RBA projecting growth of 4.75% this year and 3.5% in 2022 whilst progress in the unemployment rate continues to drive us towards full employment with the RBA expecting unemployment to normalise at 5% this year and 4.5% next year. 

Next month’s board meeting is already shaping up to be a key event with the RBA declaring at its “July meeting the Board will consider whether to retain the April 2024 bond as the target bond for the 3-year yield target or to shift to the next maturity, the November 2024 bond.”

As previously indicated, the board will not increase the cash rate until inflation is sustainably within its 2-3% target band and for this to occur the labour market will need to be tight enough to generate wages growth “materially higher than it is currently.”

Manufacturing data and retail sales

It was a busy week locally with the release of May’s purchasing managers index (PMI) which grew at a new record rate on the back of increased demand.

New orders climbed at the fastest pace since May 2016 with rising market confidence and government stimulus driving order volumes. Pleasingly, capacity is increasing to meet this increased demand.

Rounding out the positive economic data was April’s retail sales which rose 1.1% for the month, in line with expectations. Having been one of the hardest sectors hit throughout the pandemic, retail sales continue to bounce back in a further sign of consumer optimism.

ASX Weekly Wrap

The ASX200 was stronger last week advancing +1.6% on the back of positive data. The market all but ignored the latest lockdown extension in Victoria and posted new all-time highs with value stocks continuing to outperform growth and momentum.

The best performing sectors were energy adding +8.5% ahead of utilities which rallied +5.8% and recaptured most of May’s monthly losses in just one week.

Weighing on performance attribution were tech stocks which fell -1.1%, whilst consumer discretionary stocks were largely flat with Victorian businesses having to shut their doors and move back online for the duration of the lockdown.

Iron ore reclaimed the US$200/tonne level rising +7.5% to trade near US$210/tonne after Chinese steel prices continued to climb in line with demand. Despite recent provocations from China, mainly its desire to explore overseas ore resources as an alternative source to Australia’s iron ore, iron ore remains well bid.

Brent oil advanced +3.2% and WTI +4.7% after OPEC declared increased Iranian oil supply would not be a cause for concern. As previously agreed in April, 2.1m barrels per day of supply will be bought back to the market between June and July.

At a stock level Origin Energy (ORG) was the best performing stock on the ASX last week adding +16% after a couple of brokers upgraded their target prices on the stock following stronger oil and electricity prices.

Analytics company Nuix Limited (NXL) was the biggest laggard falling -23% after yet another downgrade to guidance, only one month after issuing it.

Of the core holdings in the PRIME Australian Equity Growth SMA, Santos (STO) climbed +12% on the back of strong gains in the oil price whilst Healius (HLS), which is a stock we recently added to in the portfolio and one we recommended to clients last week, rallied +5%.

The weakest two stock in the portfolio last week were News Corporation (NWS) -6% and Northern Star Resources (NST) which fell -5% as gold prices gave back some of their recent gains.

Looking ahead

There will be no Weekly Market Update edition next week given the Queen’s Birthday Public Holiday in Victoria. We look forward to seeing you back here in a fortnight.

Monday 7th June 2021 – Friday 11th June 2021

  • Monday: AU ANZ Job Advertisements (MAY), CN Balance of Trade (MAY)
  • Tuesday: AU NAB Business Confidence (MAY), New Home Sales (MAY), US Balance of Trade (APR)
  • Wednesday: AU Westpac Consumer Confidence (JUN), CN Inflation Rate (MAY)
  • Thursday: CN M2 Money Supply (MAY), US Inflation Rate (MAY), Weekly Jobless Claims
  • Friday: UK Balance of Trade (APR)  

Friday 4th June, 5pm values

All Ordinaries 7543+119+1.6%
S&P / ASX 2007295+115+1.6%
Property Trust Index1531+39+2.6%
Utilities Index6081+333+5.8%
Financials Index6662+108+1.6%
Materials Index17271+175+1.0%

Friday 4th June, closing values

U.S. S&P 5004230+28+0.7%
London’s FTSE7069+46+0.7%
Japan’s Nikkei28942-207-0.7%
Hang Seng28918-206-0.7%
China’s Shanghai3592-9-0.2%

Key dividends

Monday 7th June 2021 – Friday 11th June 2021

  • Monday: Div Ex-Date – ALS Limited (ALQ)
    Div Pay-Date – WAM Capital Limited (WAM)
  • Tuesday: Div Ex-Date – NABPF (NABPF), NABPH (NABPH)
    Div Pay-Date – Metrics Master Income trust (MXT), Metrics Income Opportunities Trust (MOT)
  • Wednesday: Div Ex-Date – WBCPI (WBCPI)
  • Friday: Div Ex-Date – WBCPE (WBCPE)


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.


A unique and personal service approach and support for all your business advisory and personal wealth management needs

Request a consultation

A unique and personal service approach to support all your business advisory and personal wealth management needs.

Request a consultation