Stoic Asset Management: Market update: 22 February 2023
Economic and market news
Unemployment in Australia unexpectedly rose to 3.7 per cent in January, up from 3.5 per cent, according to the Australian Bureau of Statistics. Commentators noted that this was the second month that the economy had ‘shed’ jobs, and lay the blame on the nine consecutive interest rate rises. The increase in unemployment was said to have surprised the market, which was expecting an outturn in line with December, (3.5 per cent) and an increase in employment.
The Governor of the Reserve Bank of Australia spoke at two Parliamentary hearings this week, setting out his view on the prospects for the economy and monetary policy.
In Australian banking news, as part of the corporate earnings season, Westpac has revealed that 45 per cent of its home loans were made with a ‘serviceability buffer’ that assumed an interest rate that will now be surpassed (2.5 to 3 per cent) if the Reserve Bank continues its rate rising cycle. However, the major bank indicated that the number of home loans in arrears by more than 30 days has only seen a small increase ‘mainly due to seasonality and cost of living pressures’, and still only represents 1.24 per cent of all its mortgages.
The US inflation imprint was 6.4 per cent, down only slightly on the previous outturn of 6.5 per cent. This was the seventh consecutive slowing of inflation, since the peak of 9.1 per cent in June 2022. Markets and commentators took this as a sign that inflation will be ‘sticky’ on its way down towards target, and that the Federal Reserve is likely to continue tightening policy in the next few months.
Australian indices
ASX 200: Fell again this week, 1.27 per cent, to 7336.3 at the close on Tuesday.
All Ordinaries: Also fell again, 1.10 per cent, closing at 7544.6 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
|
99.37 |
3.55% |
+2 |
+62 |
+238 |
|
GTAUD5Y:GOV Australia Bond 5 Year Yield |
2.25 |
93.47 |
3.62% |
+1 |
+52 |
+172 |
|
GTAUD10Y:GOV Australia Bond 10 Year Yield |
4.50 |
105.73 |
3.81% |
+1 |
+42 |
+159 |
|
GTAUD15Y:GOV Australia Bond 15 Year Yield |
3.25 |
89.76 |
4.10% |
-1 |
+38 |
+165 |
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) |
|
3.35 |
+0.25 (7 February 2023) |
+0.25 (7 February 2023) |
0.10 |
Currencies (source:RBA)
As at the close on 21 February, the AUD/USD had fallen 1.13 per cent in the week to 0.6896. The AUD/RMB had also fallen, 0.32 per cent in the same period, to 4.7384.
Commodities
There are expectations that the iron ore price will ‘surge’ by 20 per cent this year, to $150 a tonne, amid an increase in Chinese demand for steel over the second half of 2023. The faster-than-expected reopening of China is said to be fueling a demand increase, but this is coinciding with an expecting supply squeeze mid-year.
Meanwhile, it was also reported that increasing confidence about China’s economic rebound as it reopens is increasing oil prices.
Venture Capital
Forcite
Stoic investee Forcite made its official US debut this week at the American International Motorcycle Expo
Lenexa Medical
Stoic investee Lenexa Medical’s patient-centered pressure injury prevention technology, LenexaCARE, has been listed on the Australian Register of Therapeutic Goods!
Morse Micro
Stoic investee Morse Micro’s US$95 million Series A funding round has been named on the GlobalData Plc’s ‘biggest smart city deals of 2022’!
Property
Data show that the clearance rate for property auctions in Sydney this week was the highest for a year, at nearly 8 in 10. Nationwide clearance rates also rose, up 5.6 per cent to 70.8 per cent.
