Economic and market news
The most significant news this week was the collapse of three small banks in the United States, in particular Silicon Valley Bank (SVB), which had a focus on lending to the tech sector and venture capitalists. There was wide ranging discussion of the potential for this to impact the trajectory of monetary policy, and to have contagion across the markets, as had been the case in 2008. However, initial steps by US regulators to protect depositors and ‘make the banks whole’ stemmed the tide at least for the moment.
Discussion of the issue highlighted the more conservative approach of the Australian prudential regulator. There was also suggestions that this will serve to remind investors about the need to focus on risk and reward trade offs.
The wider market repercussions were seen in early trade on Tuesday, with Australian equity markets experiencing their biggest fall wince the 1987 crash – the ASX 200 fell 1.7 per cent on Tuesday morning as US markets opened for the first time since the SVB collapse and associated government/regulator actions. There were associated ‘historic’ rallies in global bond markets
The moves in global markets were taken by commentators as a sign that investors are becoming nervous that the highly leveraged financial system has become unstable amid the rapid and significant tightening of monetary policy across the world, as central banks battle against inflation.
In new economic insights, it was reported that rising rents are holding consumer confidence at 'recessionary' levels. The Westpac Consumer Sentiment Index was said to have been at 78.5 in March, with commentary indicating that this second below-80 outturn is exceedingly rare.
Australian indices
ASX 200: Fell 4.94 per cent this week, with the index falling 1.52 per cent (107.7 points) amid the market turmoil on Tuesday, to close at 7001.1 points.
All Ordinaries: Fell 4.89 per cent in the week, 1.62 per cent (118.4 points) on Tuesday, closing at 7192.6 points.
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
|
100.31 |
3.09% |
-16 |
-34 |
+177 |
|
GTAUD5Y:GOV Australia Bond 5 Year Yield |
2.25 |
95.65 |
3.16% |
-12 |
-37 |
+102 |
|
GTAUD10Y:GOV Australia Bond 10 Year Yield |
4.50 |
108.88 |
3.45% |
-7 |
-29 |
+100 |
|
GTAUD15Y:GOV Australia Bond 15 Year Yield |
3.25 |
93.08 |
3.80% |
-3 |
-21 |
+116 |
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) |
|
3.60 |
+0.25 (7 March 2023) |
+0.25 (7 March 2023) |
0.10 |
Currencies (source:RBA)
As at the close on 14 March, the AUD/USD had fallen 0.95 per cent in the week to 0.6649. The AUD/RMB had fallen 1.86 per cent, in the same period, to 4.5694.
Venture Capital
Stoic’s investees celebrated International Women’s Day in the week. Cardihab’s CEO Helen Souris was one of a panel of female leaders taking about breaking gender barriers with technology and innovation.
Property
Recent data show signs that the housing market falls in Australia are decelerating. In addition, new analysis suggests that a majority of housing markets in Australia will retain some of the record-breaking price gains recorded during the pandemic.
New data show that rising rents over the last 12 months have provided awindfall for property investors. In particular, 57 suburbs have apparently seen increases of more than 20 per cent, amid record low vacancy rates .
Separately, it was shown that Chinese residents topped the list of foreign buyers of Australian property in the six month to end-December. It wasrevealed that $1.6 bn of these purchases were approved in the period.
