Economic and market news
News this week continued to be dominated by the market turmoil arising from the banking failures in the US and crisis at Credit Suisse. In particular, the central bank liquidity support of Credit Suisse, and its subsequent merger with rival Swiss bank UBS, announced on Monday, was considered a significant test of regulatory and capital structures put in place after the Global Financial Crisis.
In Australian economic news, new data on the labour market show that a net 64,000 people found work during February; within this, 74,900 people found full time work, offset by a small loss in part time jobs. This meant that, as expected, the unemployment rate fell back to 3.5 per cent, close to its 50-year low. Also of note, was the fall in the underemployment rate, from 6.2 to 5.8 per cent. The participation rate increased to 66.6 per cent, close to last year’s record highs.
Specifically on monetary policy in Australia, there was a speech by one of the Governors of the Reserve Bank that highlighted how the impact of monetary policy has changed in recent years, in particular because of the increased proportion of fixed rate mortgages.
In the US, both producer and retail prices fell in February. This was seen as a sign of easing inflation pressures and giving the Federal Reserve 'room to pause' its monetary policy tightening. However, markets were said to still be expecting a further rate rise this week, even amid the market turmoil and associated futures market pricing of an increased risk of recession.
In early signs that the Chinese economy is responding strongly to re-opening post-pandemic, it was reported that consumer spending grew 3.5 per cent (year-on-year) in January and February, compared with falls in each of the previous three months.
In Europe, despite the market chaos surrounding issues at Credit Suisse, the ECB increased its official interest rate by 0.5 per cent ‘as promised’. The central bank reiterated the need to focus on bringing down inflation.
Australian indices
ASX 200: Fell a further 0.58 per cent this week, to close at 6960.8 points on Tuesday.
All Ordinaries: Fell 0.70 per cent in the week, closing at 7142.2 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
|
100.83 |
2.83% |
-1 |
-72 |
+144 |
|
GTAUD5Y:GOV Australia Bond 5 Year Yield |
2.25 |
96.73 |
2.93% |
-2 |
-68 |
+70 |
|
GTAUD10Y:GOV Australia Bond 10 Year Yield |
4.50 |
111.20 |
3.18% |
-5 |
-61 |
+62 |
|
GTAUD15Y:GOV Australia Bond 15 Year Yield |
3.25 |
95.84 |
3.56% |
-6 |
-53 |
+81 |
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 21 March, the AUD/USD had risen 0.63 per cent in the week to 0.6691. The AUD/RMB had also risen, 0.78 per cent, in the same period, to 4.6051.
Commodities
In response to the financial market turmoil, gold traded at record high prices in some markets this week. In contrast, concerns about the impact the emerging banking crisis might have on the global economic activity meant oil prices fell sharply over a number of days.
Venture Capital
Cardihab
Stoic investee Cardihab have been awarded $782,768 in matched funding by the Australian Government’s Entrepreneurs’ Programme - Accelerating Commercialisation. This is to continue to develop an innovative health data analysis product with the potential to further amplify the impact and efficiency of digital cardiac rehabilitation.
Certa Theraputics
The CEO and founder of Certa Theraputics, Professor Darren Kellys, spoke to the TechNation Radio podcast.
Forcite
Stoic investee Forcite announced a crowd-sourced funding opportunity, and gave a round-up of its impressive achievements in the past year.
Lenexa Medical
Stoic investee Lenexa Medical announced it is one of the 11 startups selected to be part of the inaugural Amazon Web Services Healthcare Accelerator in Australia & New Zealand.
Morse Micro
Stoic investee Morse Micro announced a strategic partnership with Quectel Wireless Solutions, a global IoT solutions provider, to deliver Wi-Fi HaLow solutions to market. Through the partnership, Quectel will integrate Morse Micro’s 802.11ah Wi-Fi HaLow technology into a new module, designed for consumer, industrial, agricultural and other use cases.
Anchored by Morse Micro’s MM6108 microchip, and leveraging FCC-certified reference designs, Quectel’s module will accelerate the adoption of Wi-Fi HaLow across the globe, supporting the development of long-range IoT solutions for all.
Property
New data gave more evidence that the temperature of the housing market is changing. Figures show that Sydney’s housing prices lifted by 1 per cent over the past four weeks, the strongest move since January 2022.
There was a suggestion that 275,000 investors in property could struggle to refinance their loans when they roll off the fixed rate period this year, thanks to the reduction in borrowing capacity that comes from significantly higher interest rates. Commentators indicated this could force investors to sell properties.
There was discussion about the risks to commercial property prices in the higher interest rate environment. In particular, it was suggested that major office building values will need to be marked-to-market and reduced, by as much as 10 to 20 per cent. It was highlighted that this will increase gearing levels for these properties, potentially putting loans at risk and reducing the appetite of major investors such as super funds to hold them.
