Economic and market news
After the Reserve Bank of Australia increased interest rates last week, for the 11th time, it published revised economic forecasts. Economic growth is now expected to be 1.2 per cent in the year to December, down from the 1.6 per cent expected for that period three months ago. Expectations are for unemployment to start to tick up soon, to end the year at 4 per cent, up from its near-historic low of 3.5 per cent now. All of this is set to happen in a climate of sticky inflation, where inflation will make it down to 6.3 per cent by June (from 7 per cent in March) and 4.5 per cent by December – still well above the target range of 2-3 per cent.
New data on business conditions in April were said to be showing the impact of ‘soaring’ inflation and 11 interest rate rises. The figures show business conditions at the lowest level since early 2022, with declining forward orders and below average confidence.
In the United States, the Federal Reserve lifted its official interest rates for the tenth time, by a further 25 basis points. The key rate is now 5.25 per cent, the highest level in 16 years.
It was reported that the Chair, Jerome Powell, admitted that the tightening of monetary policy was having an impact on ‘interest rate sensitive parts of the economy’, and that it is possible the US will have a ‘mild recession’. It was noted that the wording of the statement on the need for future raises has been changed this month, but Powell said that a decision on when to pause had not been made at the May meeting.
The European Central Bank also raised its policy rate by 0.25 percentage points. This was a slowing in pace (previous raises have been 50 basis points), but it was reported that the ECB President made clear that there is more policy tightening to come.
Australian indices
ASX 200: Was almost unchanged over the week, falling 0.09 per cent, to close at 7264.1 points on Tuesday.
All Ordinaries: Also fell only slightly, 0.04 per cent in the week, closing at 7456.7 points on Tuesday.
Government Bonds
Government Bond Yields (Source: Bloomberg)
|
NAME |
COUPON |
PRICE |
YIELD |
1 DAY |
1 MONTH |
1 YEAR |
|
GTAUD2Y:GOV Australia Bond 2 Year Yield |
3.25
|
100.05 |
3.21% |
+3 |
+39 |
+46 |
|
GTAUD5Y:GOV Australia Bond 5 Year Yield |
2.25 |
95.81 |
3.15% |
+3 |
+25 |
-9 |
|
GTAUD10Y:GOV Australia Bond 10 Year Yield |
4.50 |
108.80 |
3.45% |
+5 |
+26 |
-11 |
|
GTAUD15Y:GOV Australia Bond 15 Year Yield |
3.25 |
93.19 |
3.80% |
+5 |
+27 |
+8 |
Reserve Bank of Australia (Source:RBA)
|
RBA CASH RATE TARGET (RBATCTR:IND) CURRENT (per cent) |
MOST RECENT DECISION (percentage points) |
MOST RECENT CHANGE (percentage points) |
1 YEAR PRIOR (per cent) |
|
3.85 |
+0.25 (2 May 2023) |
+0.25 (2 May 2023) |
0.35 |
Currencies (source:RBA)
As at the close on 9 May, the AUD/USD had risen 1.09 per cent in the week, to 0.6778. The AUD/RMB also rose, 1.24 per cent, in the period, to 4.6925.
Commodities
It has been suggested that the oil price is set for the third straight week of falls, amid turmoil arising from fears of recession in the United States, which would stem demand.
Venture Capital
Ferronova
Stoic investee Ferronova has shared the results of its preclinical gastric study with the gastro intestinal clinical community.
Forcite
Stoic investee Forcite has shared Forbes Magazine's review of its MK1S helmet. It describes it as a ‘smart helmet finally done right’!
Kinoxis Therapeutics
Stoic investee Kinoxis Therapeutics has announced a $A273m licensing deal with Boehringer Ingelheim to continue developing its first-in-class oxytocin targeting small molecules.
Stoic has been privileged to support the team at Kinoxis since 2018, alongside Uniseed, and watch them hit milestone after milestone. It is another reminder of the potential for ground breaking research, and potential outcomes for human health, that come from venture capital investment.
Property
New housing approvals apparently fell to the lowest level in two and half years in March, according to the latest data. The fall in the market, which now totals 15 per cent over 12 months, was attributed to a surge in borrowing and construction costs that depressed new sales and projects.
It was reported that the first significant neighbourhood mall sale to be done in Victoria in six months has been undertaken by a Chinese investor. The Coles supermarket-anchored Village Lakeside Shopping Centre in Pakenham in Melbourne’s south-east apparently sold for about $25 million.
