AUSTRALIAN MARKET WRAP
New inflation data in the United States caused significant move in interest rate expectations and markets. Accelerating, and stronger-than-anticipated, core inflation led Fed-watchers and commentators to suggest that a third consecutive 0.75 percentage point increase in official rates is a certainty, and that a full 1 percentage point increase is a strong possibility.
The Australian markets followed the US market sell off, shaving $60 billion last Wednesday. Morgan Stanley and Goldman Sachs have warned that there could be more market falls to come, if US inflation remains stubbornly high.
In domestic economic news this week, and ahead of the new Federal Government’s first budget in October, the Treasurer announced that the nation’s finances are $50 billion better off than expected. However, he warned that in the budget there will only be ‘responsible cost of living relief… focused on childcare and medicines, and also our efforts to get wages moving again’. Looking at the evolving economic environment, new labour force data for August show an increase in participation led to a slight move up in the unemployment rate to 3.5 per cent (from 3.4 per cent the previous month, a 48 year low). Two thirds of all working age people in Australia are now either employed or looking for work.
The Reserve Bank Governor made one of his biannual appearances before the parliamentary economics committee that is part of the structure of the institution’s accountability. At the hearing, he discussed the high level of inflation and how the bank will approach policy going forward, reiterating that there is no ‘pe-set path’ but clearly flagging that more interest rate increases will be required to tame inflation. He also stressed that an economic ‘soft landing’ – a slowdown in activity that does not lead to recession – will be difficult if the global economic outlook worsens.
Further to the recent discussion about reforming or removing the Significant Investor Visa, former Trade Minister Andrew Robb, has suggested that Australia could be missing out on millions of dollars of inward investment from Chinese nationals because of concerns that the Foreign Investment Board will reject transactions on political grounds.
Australian indices
ASX 200: Fell 2.90 per cent over the week, to 6806.4 points at the close on Tuesday.
All Ordinaries: Also fell, 3.08 per cent in the past week to 7030.1 points at the close on Tuesday.
Currencies
As at the close on 20 September, the AUD/USD was down 2.24 per cent on last week, at 0.6720. The AUD/RMB was down 0.96 per cent, in the week to 4.7121.
Government Bonds
Government Bond Yields (Source: Bloomberg)
|
NAME |
COUPON |
PRICE |
YIELD |
1 DAY |
1 MONTH |
1 YEAR |
|
GTAUD2Y:GOV Australia Bond 2 Year Yield |
2.75
|
99.42 |
3.09% |
-4 |
+25 |
+312 |
|
GTAUD5Y:GOV Australia Bond 5 Year Yield |
4.75 |
105.58 |
3.41% |
-4 |
+24 |
+277 |
|
GTAUD10Y:GOV Australia Bond 10 Year Yield |
1.25 |
80.73 |
3.63% |
-5 |
+23 |
+233 |
|
GTAUD15Y:GOV Australia Bond 15 Year Yield |
3.75 |
99.22 |
3.80% |
-5 |
+19 |
+211 |
Reserve Bank of Australia Rates (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) |
|
2.35 |
+0.50 (6 September 22) |
+0.5 (6 September 22) |
0.10 |
Property
The annual AFR Property Summit led to a wide range of discussions about the trajectory of the sector and changes in its trends. This included a consideration of how work patterns and household structure are resetting post-pandemic. A speech at the event by a senior Reserve Bank official discussed the impact that a sudden surge in immigration might have on property values. However, in contrast, market economists were quoted suggesting that if the central bank raises interested rates in line with market expectations housing prices could fall by as much as 25 per cent and push the economy into recession.
New datareportedly show that apartment prices in some inner Melbourne suburbs have surged by as much as 21 per cent in the past 12 months, despite the broader decline in home values across the country.
Elanor Investors Group
Stoic property partner Elanor Investors Group is reportedly hoping to sell one of its premium assets, Peppers’ Cradle Mountain Lodge in Tasmania, and is confident it can secure a $100 million price tag in the current market, despite its book value of $73.5 million.
Venture capital
The Australian Financial Review looked at data on the share of venture capital funds, and the proportion of startups receiving funding, who have female leaders.
Company updates
Ferranovo
Stoic investee Ferranovo has published research on its innovative and novel approach to robo-assisted Sentinel Lymph Node Biopsy. It has also been hailed as one of South Australia’s 22 startups to watch!
Forcite
Stoic investee Forcite has won best in class for product design in the Automotive and Transport category with at the 2022 Good Design Australia Awards. Alongside this, their Chief Product Officer, Sebastian Adams, talked about his career and his advice for aspiring product leaders.
