Originally published by Rivkin Securities
European stock markets generally opened down overnight and struggled to get back to positive for the rest of the session. Both the FTSE and DAX closed down approximately 0.3% after regaining most of the losses suffered earlier in the session. With US markets closed for the Independence Day holiday there are no leads from the S&P 500 or Dow this morning. The S&P/ASX 200 had a roaring day yesterday, closing up 1.75%.
Although the strength yesterday was broad based, it is worth looking at which sectors performed particularly well. The table below shows the one day and three-month returns for the major ASX sectors.
One day and three-month returns of each of the ASX GICS sectors is shown. The Rank and Rank2 columns rank the one day and three month returns respectively.
Financials were the leading sector yesterday with a 2.21% return for the day as the South Australian bank levy looks like it will be blocked by the Liberal Party. National Australia Bank (AX:NAB) rose 2.8% on the day and reaching a one month high. Telecommunications were the second best performing sector with Telstra (AX:TLS) closing up 2.0%. Yesterday’s rally in financials and telcos comes after a weak three-month performance for these sectors, ranked 7th and 10th respectively based on three-month return with both sectors facing headwinds at the moment. Financials are going through a period of very negative sentiment, particularly for the large banks, that is affecting their share prices, while telecommunications are facing challenges related to the NBN and increasing competition. Although industrials were middle of the pack for yesterday’s rally, they are the best performing sector on a three-month basis, up almost 9%.
Yesterday’s retail sales data surprised on the upside for the second month in a row with a month on month growth in retail sales of 0.6% compared to expectations of a 0.2% rise. This marks a substantial improvement in retail sales data for the year and will hopefully reflect in the revenue of Australian retailers. It also provides evidence that the Australian economy isn’t as weak as some of the other data would suggest.
The RBA kept rates unchanged yesterday, as expected, however signs of hawkishness that some observers had expected were notably absent. As a result, the Australian dollar dropped almost 1% upon the release of the statement which may have been the RBA’s goal all along. Having reached US$0.77 before the announcement, the Australian dollar was at a multi-month high which the RBA would likely consider to be ‘too high’. In any case, the Australian dollar is now trading around US$0.76.
ASX 200 futures are suggesting a flat open this morning.
Data releases:
- US FOMC Meeting Minutes 04:00am AEST