Australian Investment Blog

Good Afternoon everyone

Market Data

What Mattered Today

The Aussie mkt was skittish today – with some massive intra session swings in both stocks and bond markets. Equities were reasonably strong early, came off the boil mid-morning before weaker than expected inflation data got the mkt excited about the potential for a May rate cut and we were bid up till about 12.30pm. From then, BIG lines of stock got offered in Aussie large caps – particularly the banks as the Aussie dollar tanked. Seems the inflation print prompted some overseas money to rush the exits amid a falling currency…

CPI printed -0.2% QoQ….yes, that is correct v market expectations for +0.2%. YoY inflation sits at 1.3% v 1.8% expected with the underlying inflation print – which is watched by the RBA printing 1.55%. So a very weak print which should prompt Glenn Stevens to cut rates – particularly given the recent trends as per below….



Bond markets had a HUGE day….the 2 year yield here both intra-day and daily shows what a surprise the print was – and the likely ramifications around interest rate policy. Clearly the market is now positioning for a bigger chance of a cut next month.

One issue around that way of thinking stems from Glenn Stevens most recent speech in the U.S. It was unsurprisingly all about monetary policy but importantly, he firmly implied that central banks have done their job and the batten should now be passed to Governments to stimulate through fiscal measures. In short, GS thinks interest rate cuts can only do so much and the Govt needs to support growth through supportive policy, spending and the like – which we tend to agree with

Anyway, the weak print got the Aussie Dollar offered hard throughout the day, and we saw international money come out of Oz – particularly in the liquid big caps….the miners, Banks and the like. It looked like a BIG line hitting the banks after this print – see here the intra-day chart of CBA. Sustained selling…



Stocks & Sectors Today
ASX 200 closed today at 5187 after touching a high of 5281….a low of 5179 makes it a +100pts range…wooshka!

Source; Bloomberg

ASX 200 Movers

***What Matters Tonight***

U.S earnings are worth a mention first up given a few of the BIG tech coys reported last night + a heap are reporting this evening. The U.S is all about growth, and the tech sector has been a big driver of said growth over the last five years or so.

The likes of Twitter, Facebook, Apple, Ebay, Amazon etc have all been extremely supportive of the U.S recovery. We talked about Apple this morning given it missed expectations and the stock was down a lot in after-hours trade. The main issue is around top line revenue growth. As we’ve discussed recently, EPS is holding up OK given they can manufacture that (cost cutting, stocks buy backs etc) with 80% of companies beating expectations there, however revenue growth is harder, and we’ve only seen 59% beat expectations. Importantly, the expectations were for a decline in Q1 profit of 9.2% - so although we see the vast majority beat this number, it’s not a good result + shows the U.S is losing some momentum at a time when U.S rates are tipped to rise.

Staying in the U.S, the FOMC meeting wraps up tomorrow morning our time. No press conference and no rate hike HOWEVER commentary about whether or not June is ‘live’ for a hike will be the main driver. We suspect it will largely be a non-event however the market is too complacent…volatility is low, and downside protection cheap. Complacency makes us nervous…

Main names reporting tonight are; Boeing / Comcast / Resmed

European leads are mixed with the FUTURES on the FTSE -6, DAX +12 & CAC +1
In the US, DOW FUTURES are off -22, S&P FUTURES are off 3

Regards,
The Market Matters Team
Level 12 28-34 O'Connell St
Sydney, NSW 2000

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