Economic and market news
In Australia, it was reported that retail sales have not grown in value over the last five months, making clear that the post-pandemic retail spending surge has now passed, thanks to interest rate and cost of living rises.
In the US, the Federal Reserve raised its policy rate target for the ninth consecutive time. The 0.25 percentage point was expected, despite the market turmoil. However, a change in language used by the Chair, Jerome Powell, to ‘We no longer state that we anticipate ongoing rate increases will be appropriate to quell inflation. Instead, we now anticipate that some additional policy firming may be appropriate,’ was taken by commentators as an indication there was been a change in thinking on the policy trajectory from here.
Likewise, the Bank of England raised its policy rate by 0.25 percentage points, the eleventh consecutive raise. Commentators determined that the language of the statement indicated that the policy committee are no longer on an automatic path to more rate rises, and are open to concluding that the recent pick-up in inflation may be a ‘blip’.
In banking news in Australia, the Chairman of the Australian Prudential Regulatory Authority indicated that it had recently undertaken one of its periodic ‘stress tests’ of banking organisations. This involved scenarios of an increase in the Reserve Bank cash rate to 4.5 per cent, an increase in the unemployment rate to 11 per cent, and a 43 per cent decline in national house prices (which would trigger credit ratings downgrades shutting the banks out of wholesale funding markets), and a ‘major and costly cyberattack’. In these circumstances, it was said that, although significant credit losses would be incurred, as well as falls in profits, banks ‘in aggregate’ would remain above minimum capital requirements.
Australian indices
ASX 200: Rose 1.05 per cent this week, to close at 7034.1 points on Tuesday.
All Ordinaries: Rose 1.08 per cent in the week, closing at 7219.4 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
|
100.64 |
2.91% |
+10 |
-66 |
+113 |
|
GTAUD5Y:GOV Australia Bond 5 Year Yield |
2.25 |
96.31 |
3.02% |
+10 |
-65 |
+35 |
|
GTAUD10Y:GOV Australia Bond 10 Year Yield |
4.50 |
110.21 |
3.29% |
+10 |
-55 |
+39 |
|
GTAUD15Y:GOV Australia Bond 15 Year Yield |
3.25 |
95.01 |
3.63% |
+9 |
-47 |
+59 |
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 28 March, the AUD/USD was little changed, falling only 0.03 per cent in the week to 0.6689 (compared to 0.6991 last week). The AUD/RMB also fell 0.03 per cent, in the same period, to 4.6037 (compared to 4.6051 last Tuesday).
Commodities
It was reported that the price of Lithium may have reached its low, on the back of Chinese battery manufacturers seeking to re-stock supplies and the growing global demand for electric vehicles.
Venture Capital
Cardihab
Stoic investee Cardihab have been awarded part of a $3.7M grant from the Australian Government’s Medical Research Future Fund (MRFF) to support four high-growth-potential digital health companies through to commercialisation. Cardihab will use the funds to continue development of its digital cardiac rehabilitation products and further expansion in Australia and internationally.
Wildlife Drones
Stoic investee Wildlife Drones were asked by the New Zealand Government to demonstrate their cutting edge tracking technology on the Whenua Hou Island – one of the last strongholds for the critically endangered Kakapo. They even aided in locating birds on parts of the Island that were previously excluded because they can’t be physically accessed by rangers.
Property
There was further discussion on the issues in the commercial real estate market – a sector that has historically been at the heart of many financial stability crisis. The Australian Financial Review suggested that rising defaults in America’s office real estate is sending shockwaves through the banking sector. The value of commercial real estate debt in America was said to have risen 80 per cent in the last 10 years to $6 trillion. This is putting some landlords now in difficultly in the face of significant increases in interest rates, and rising unemployment and vacancies. However, some investors have apparently started positioning themselves for the time when valuations merit buying back in.
