But on Thursday, investors were happy to pick up shares in companies such as Wesfarmers, up 2.6 per cent to $34.92, Afterpay, up 2.3 per cent to $20.42, Flight Centre, up 3.2 per cent to $41.38, and G8 Education, up 3.5 per cent to $3, driving an afternoon recovery for the broader market.
Citi equity strategists believe that there is more upside for the Australian market this year and are sticking with their year-end target of 6500.
“Some pick-up in the global economy would still seem likely, given the efforts of policy makers, provided outcomes of trade and Brexit negotiations aren’t disruptive,” Tony Brennan said.
“Meanwhile, lower growth in the Australian economy looks likely to persist now, but mightn’t slip further. Yet earnings growth actually seems likely to be stronger, as a result of commodity prices.”
Miners were the strongest performer by sector on Thursday, adding 12 points to the index, as Pilbara Minerals surged 15 per cent to 81¢ and Orocobre rose 2.8 per cent to $3.31.
“The strength in commodity prices, particularly iron ore, has been driving earnings upgrades, and further upgrades seem possible given spot prices seem to imply higher consensus earnings, and our analysts see prices persisting for some time,” Citi’s Mr Brennan noted.
“Upgrades to resource earnings for fiscal year 2019 and fiscal year 2020 could result in reasonable earnings growth for the market, despite the downgrades likely in other sectors, and could lessen the downside risks to earnings from the slower domestic economy.”
On the downside, Platinum Asset Management fell 3 per cent to $4.61, Eclipx dropped 4.3 per cent to 67¢ and Seven West Media slid 3 per cent to 48¢.
CYBG shares rose 1.9 per cent to $3.70. The mid-sized UK banking group has seen its shares fall by around 7 per cent in the past week, Bell Potter analysts noted while reinstating their trading buy rating. “As a trading stock with a share price moving within the $3-$4 range, we are comfortable with the upgrade despite ongoing Brexit noise,” they said. The analysts based their view on strong underlying fundamentals, an improved net interest margin outlook, diminishing legacy conduct issues terminating in August, a strong capital position and ongoing cost management.
New Zealand business confidence
A March survey from ANZ showed a net 38 per cent of survey respondents expect the New Zealand economy to weaken over the next year, a rise from 30.9 per cent from February. “The ease of credit index, a perennial concern of ours, weakened again to a new extreme of -40.0. This is the worst reading in the 10-year history of the index, and consolidates the sense that financial conditions are tight for firms, particularly in agriculture,” JPMorgan’s economics team noted.
The number of job vacancies in Australia increased by 1.1 per cent in trend terms over the February 2019 quarter, according to the Australian Bureau of Statistics. The seasonally adjusted number of job vacancies increased by 1.4 per cent over the February 2019 quarter, compared to a 5.2 per cent gain recorded in the same quarter a year ago. The data for February was “consistent with the recent slowing in other economic indicators”, ABS chief economist Bruce Hockman said.
US crude futures traded US25¢ lower at $US59.16 a barrel. WTI futures fell almost 1 per cent on Wednesday after EIA data showed that US crude inventories surprisingly rose last week by 2.8 million barrels. “For the time being, we still believe that the OPEC‑led deal to sideline approximately 1.2 per cent of global supply in the first half of 2019 will be the key driver of oil prices. The plan is likely to balance oil markets before mid‑year, particularly with Saudi Arabia doing more than its agreed share to bring global oil stockpiles back to normalised levels,” CBA analysts said.
The Australian dollar edged up 0.2 per cent to US70.99¢ after tumbling along with its New Zealand counterpart on Wednesday after the New Zealand central bank struck an unexpectedly dovish tone on the future direction of interest rates. “Reserve Bank of New Zealand decisions don’t usually have a big impact on Australia. But the similarity of the Australian and New Zealand macroeconomic backdrops at present, and the RBNZ’s concern about growing external risks from “our key trading partners including Australia, Europe, and China” has caused a reaction on both sides of the Tasman,” CBA’s Richard Grace said.
Sarah Turner writes on markets and is based in our Sydney newsroom.