Expected index adjustments
Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 3 June 2019. If you have any queries or questions on this please let us know in the comments section below. For further information regarding dividend adjustments, and how they affect your positions, please take a look at the video.
NB: All dividend adjustments are forecasts and therefore speculative. A dividend adjustment is a cash neutral adjustment on your account. Special Divs are highlighted in orange.
How do dividend adjustments work?
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Aussie growth underwhelms: Australian GDP data was the highlight of the economic calendar yesterday. All-in-all, the data was of minimal impact, though it did for make big headlines: the growth rate came-in at 1.8 per cent on an annualized basis, as expected – the slowest rate of economic growth since the GFC. A poor print undoubtedly, but one that had been priced into the market well in advance. Hence, markets were little moved upon the release. The ASX200 hardly budged. The Australian Dollar lifted very slightly, and temporarily tussled with the 0.7000 handle. And interest rate markets increased very marginally the probabilities of more RBA cuts by year-end.
Where the weakness is: The data was more of interest for economists and other pedants. And there were some interesting takeaways from the release. As is well known, one of the major headwinds for domestic growth is private consumption, which continued to show signs of slowing. The savings ratio also lifted, as consumers seemingly opted to defer spending and pocket their modest pay rises. More than just demand side concerns, there was also a noteworthy drag on growth from the supply side. Dwelling investment also contracted in the last year, in line with what has been a well-publicised slowdown in construction activity, and sustained falls in the property market.
Where growth is coming from: The GDP data wasn’t without its silver linings, of course. A series of factors leapt-out as the primary drivers of growth in the Australian economy in the past 12 months. It was largely improvements in the nation’s terms of trade, courtesy of the major multi-month rally in iron ore, followed by big government spending measures, mostly in form of the NDIS and other health services, that proved the greatest contributors to growth. Though welcomed, to be sure, the areas of Australia’s economy sustaining growth speaks of a country currently working below its capacity, and in need of some sort of a boost.
Why the RBA is cutting rates: It’s this dynamic that explains, and perhaps even vindicates, the RBA’s decision to lower interest rates on Tuesday. Domestic economic conditions are weak (and likely softening), and requires a little policy support, from central bankers and government alike, to stimulate ongoing employment and GDP growth. Based on such a logic, the pricing-in of interest rate cuts into the back end of the year appear highly rational. And this seems especially so when considering that (as was alluded to by the RBA on Tuesday afternoon), international economic growth is likely to slow, if not falter, due to the pernicious consequences of an escalating global trade-war.
Risk-appetite lifts overnight: Which leads to the overnight price action in North America, and to a somewhat lesser extent, Europe. Risk appetite has been piqued by news that US President Donald Trump stated his belief that Mexico wants a trade-deal to happen, as well as comments from Trump trade-advisor Peter Navarro that the tariffs on Mexico may not have to go ahead. The headlines (and really, for now that’s all they are) stoked a rally in US equity indices; catalysed a fall in the VIX; lead to a narrowing of corporate credit spreads; and provided room for a bounce in the US Dollar,
Sentiment improves, fundamentals haven’t: The question becomes now whether we’ve put-in a new low in global equities, or whether this is just a little fake-out. There is lingering suspicion that it may be closer to the latter, given the fact that although friendly words are being passed between the Americans and Mexicans, nothing has truly changed yet. Even more to the point, the Americans and Chinese have in no way thawed their present animosity towards one another. It suggests that although market sentiment has clearly improved in the last few days, the fundamentals haven’t changed. They could, by all means: but signs of that aren’t here yet.
The better measures of fundamentals: Probably the more pertinent facts here, too, is US stocks’ rally is very “defensive” in nature, and has been ignited mostly by an ostensibly dovish pivot from the Fed. Despite all the confidence that markets have reached a fresh turning point, US Treasuries are still rallying, especially at the front end of the curve. It suggests that the market is assuming the Fed will cut aggressively, and soon, to try to engineer a “soft-landing” for the US economy. The sectors in the S&P500 that have outperformed overnight are safe, yield-generating stocks – not those typically tied to greatest optimism about fundamental economic growth.
US Retail Sales capped-off last week: The climax of last week’s trade was Friday night’s US Retail Sales data release. As is well known, sentiment in the market centres around concern for the state of the global economy. As the biggest component, of the world’s biggest economy, US consumption data was hotly awaited to test the thesis that the global economy is winding down for another cycle. As it turns out: right now, those fears are very slightly exaggerated, if the US Retail Sales data was anything to go-by. Core Retail Sales came-in bang on expectations at 0.5%, taking the annualized figure to around 3.2 per cent.
Fed-cut expectations unwound slightly: Solid-enough US Retail Sales data numbers tempered some of the enthusiasm for rate cuts from the US Fed. To be clear: imminent US rate cuts are still in the market. In fact, 25 basis-points of cuts remain implied for July’s Fed-meeting. However, as it pertains to this week’s meeting, as well as the aggressiveness of future policy intervention from the Fed, traders unwound some of their rate-cut bets in the market. US Treasury yields climbed as a consequence on Friday, stifling the rally in global sovereign debt, with the yield on 2 Year US Treasuries, in particular, jumping by as much as 7 points.
Bond yields climb, and stocks dip: The marginal pricing-out of Fed-intervention in the US economy was a negative for US stocks during Friday’s trade. Seemingly, this was particularly true for high-multiple stocks in the S&P500, like US-tech, which lead the overall market lower. As is widely known, US equities’ strong performance year-to-date has been largely attributable to a progressive increase in rate-cut expectations from the Fed. Though the overall trend remains intact – that is, rate-cuts are coming from the Fed in the near-enough future – Friday’s US Retail Sales numbers somewhat curbed the excitement for imminent, easier monetary policy-conditions, and its consequent benefit for US risk assets.
US Dollar rallies across the board: A shift higher in US rates markets catalysed a spike in the US Dollar. The Dollar Index climbed 0.64 per cent on Friday, underpinned primarily by a tumble in the EUR/USD, which fell into the low 112.00 handle following the release. The Sterling also felt the pinch, plunging into the 1.25 handle for the first time since December last year, unaided by the ongoing uncertainty associated with the UK’s ruling Tory party’s leadership contest. While the Japanese Yen, as the final piece of the global currency market’s big-quartet, also softened against the Greenback – though it’s still finding buyers amidst continued global economic uncertainty.
Australian Dollar tests new lows: This dynamic in global currency markets weighed heavily on the Australian Dollar, in particular. The AUD/USD touched a new-low on Friday, trading at levels not experienced since January’s notorious FX-market “flash-crash”. The all-important yield differentials between US Treasuries and Australian Commonwealth Government bonds crept wider, with the spread between the comparable 2-year bonds expanding to 85 points. The local unit now hangs precariously above a level of price-support in the market around 0.6865, which has been tested on 4 separate occasions in the last month. It sets-up a big week for the currency, ahead of the release of tomorrow’ RBA minutes release, and Thursday’s Fed-meeting.
Chinese data disappoints: Of course, the Australian Dollar remain sensitive to the global growth outlook, on top of these two events – especially as it pertains to the Chinese economic narrative. Traders were handed a touch of information on the subject Friday, with the release of the Middle Kingdom’s monthly data-dump. What was revealed was, at best, a mixed picture: Fixed Asset Investment numbers missed, as did Industrial Production data; but Retail Sales beat, and joblessness held steady. For markets, the data was vapid – not good enough to ameliorate the economic outlook, but not bad enough to warrant more economic stimulus – resulting in a dip in Chinese indices.
A night loaded with information: The pointy end of the week is under-way, and if only relatively speaking, markets are moving on the back of several key stories. Naturally, the centrepiece of this is Wall Street; and there’s been a timely mix of corporate data, economic developments, central bank meetings, and politics for market participants to digest. The intra-day battle of these narratives has caused some modest, but interesting enough, price action in financial markets overnight; with Apple’s earnings beat, weak ISM Manufacturing PMI data, a more neutral US Federal Reserve, and sputtering trade-talks between the US and China combining to twist market sentiment in interesting ways.
The Fed centre of market attention: Proving itself once more to be the gravitational centre of the financial universe, the US Fed meeting has had the greatest hold over market participants overnight. The Fed delivered the news that many traders had been expecting: it doesn’t possess the “dovish” disposition that interest rate markets are implying. While the Fed did effectively downgrade its inflation forecasts, and dropped the interest on excess reserves to 2.35 per cent, Fed Chair Jerome Powell went to lengths to implore in his press conference that the Fed remains truly patient. That is: interest rates could move either higher or lower from where they are now.
Markets sell-off on Powell’s neutral tone: After somewhat of a tussle, intraday price action suggests a market that has bought into Fed Chair Powell’s words. Having eked out another small gain to its all-time highs, touching 2954 in early North American trade, the S&P500 has sold of post-Fed meeting, to have shed in the realm of 0.7 per cent in the final two hours of the Wall Street session. Predictably, the US Dollar has rallied as traders unwind some of their bets on interest rate cuts from the Fed this year, leading to a lift in US Treasury yields at the front end of the US yield curve.
Weak US economic data compounded sell-off: As it stands right now – and this reflects the knee **** nature of the price response – markets have an implied probability of 19 basis points of cuts from the Fed by year end. It’s worth noting, that although the Fed was the primary concern for markets last night, econo-watchers were taken aback by some poor US economic data early in the session’s trade, and probably compounded the impacts of the Fed’s “neutral surprise”. US ISM Manufacturing PMI numbers were released, and showed a significant miss: it printed at 52.8, versus expectations of 55.0 – the lowest print of this measure in 2-and-half years.
US earnings lose some of their shine: The Fed, and to a lesser extent the ISM PMI numbers, have taken the steam out of what has been an otherwise solid earnings season. For one, US futures had been priming market participants for a bullish day on the market yesterday, after market bellwether Apple Inc exceeded expectations in their earnings Overall, US earnings have been positive, at least in relation to what has been priced in by the market leading into reporting season. But the little retracement in US equities last night betrays how much this market still relies on cheap money, and favourable discount rates, to sustain itself.
ASX to follow Wall Street: Taking Wall Street’s lead: the ASX200 ought to shed 30 points this morning. The ASX is in the throes of its own earnings season; and thus far, it too has provided investors plentiful information. But for the index trader, this reporting season centres around the banks, and how their earnings drive bullishness of bearishness in the overall ASX200. And so far, after the ANZ reported yesterday, the impact has proven the former. Likely owing to a bit of “buy the rumour sell the fact” activity, the financials sector lifted the overall ASX200 yesterday, adding 30 points to the index.
The banks in the bigger picture: For macro watchers and traders, despite the short-term lift in bank shares yesterday, the question regarding the banks pertains to whether what was revealed could spark a turnaround in trend in their share prices. The answer to this, which will be further illuminated when NAB reports today, isn’t compelling: in the big picture, the banks have traded lower for several years in-line with credit growth and property prices — two things the ANZ in its half-year results said it expects to be a challenge for the bank, and by extension the Australian economy, going forward.
Written by Kyle Roddda - IG Australia
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.
The value of shares, ETFs and ETCs bought through a share dealing account, a stocks and shares ISA or a SIPP can fall as well as rise, which could mean getting back less than you originally put in. Past performance is no guarantee of future results.
CFD, share dealing and stocks and shares ISA accounts provided by IG Markets Ltd, spread betting provided by IG Index Ltd. IG is a trading name of IG Markets Ltd (a company registered in England and Wales under number 04008957) and IG Index Ltd (a company registered in England and Wales under number 01190902). Registered address at Cannon Bridge House, 25 Dowgate Hill, London EC4R 2YA. Both IG Markets Ltd (Register number 195355) and IG Index Ltd (Register number 114059) are authorised and regulated by the Financial Conduct Authority.
The information on this site is not directed at residents of the United States, Belgium or any particular country outside the UK and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.