AUSTRALIAN MARKET WRAP
The domestic economic and political debate has this week been dominated by discussion about jobs, immigration, skills and pay, ahead of the Australian Government’s ‘Jobs & Skills Summit’ this Friday. The powerful trade union lobby was gaining traction, ahead of the Summit, with weekend media highlighting the common ground between them and ‘big business’ in wanting more tertiary training, funding for apprentices, and skilled migration. However, union calls for changes to wage bargaining practices (so that agreements can be struck across more than one employer) were a differentiating factor, with some concerns in political and business circles that the Summit agenda could be ‘hijacked’ by this aspect. Greater trade union membership and involvement in particularly pay in small businesses was considered by many commentators a retrograde step for Australia’s labour market flexibility; which has been key to its relative economic strength post the global financial crisis and the pandemic.
Markets and commentators were poised for and then reacted strongly to the US Federal Reserve Chairman’s speech on Friday. As an indicator of the trajectory of monetary policy. the speech was seen as being the ‘most hawkish’ to date, suggesting that rates will continue to rise sharply for some time, to suppress inflation in the US, regardless of the potential impact that could have on economic growth. Commentators noted that the key aspect of the speech that had markets finally believing that Jerome Powell is serious about staying the course, was the referencing of former Fed chair Paul Volker’s (who raised rates to 21.5 per cent in 1981 to crush runaway inflation) arguments that it is better to ‘hurt the economy a little now, than be forced to hurt it a lot down the track’. US Markets fell on it release, with two-year US Treasury yield hitting 3.46 per cent during Monday, the highest rate in 15 years. Australian markets also followed suit on Monday.
There was more discussion about the moves that China is taking to support its economy. Premier Li was reported on Tuesday as saying that the government has rolled out ‘reasonable and appropriate’ but ‘more forceful’ economic policies this year than it did in 2020. However he has also apparently warned the country faces an arduous task in ensuring its recovery.
Australian indices
ASX 200: After falling in reaction to the Federal Reserve Chairman’s speech, the index was left almost unchanged on the week, rising 0.5% compared with last Tuesday night, at 6998.3 points at the close on Tuesday.
All Ordinaries: was also little changed, up 0.43% in the past week to 7230.4 points at the close on Tuesday.
Currencies
As at the close on 30 August, the AUD/USD was up 0.41% on last week, at 0.6905. The AUD/RMB was also up slightly, 1.32%, in the week to 4.7765.
Commodities
It was reported that European gas prices fell by 20 per cent on Monday night, on news that Germany’s storage facilities are at 85 per cent, ahead of the schedule required to prepare for winter. However, oil prices were up at a monthly high on concerns that unrest in Libya will impact supplies.
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
|
99.59 |
2.97% |
-8 |
+58 |
+299 |
|
GTAUD5Y:GOV Australia Bond 5 Year Yield |
4.75 |
105.92 |
3.35% |
-9 |
+59 |
+277 |
|
GTAUD10Y:GOV Australia Bond 10 Year Yield |
1.25 |
80.84 |
3.60% |
-6 |
+55 |
+245 |
|
GTAUD15Y:GOV Australia Bond 15 Year Yield |
3.75 |
99.41 |
3.79% |
-5 |
+53 |
+225 |
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) |
|
1.85 |
+0.50 (2 August 22) |
+0.50 (2 August 22) |
0.10 |
Property
The number of apartments under construction on the east coast of Australia has apparently fallen to a decade-plus low due to tighter lending constraints on investors, and a pandemic-driven move away from units. It was opined that this will create supply shortages that will push prices up in 18 months’ time, especially in Sydney.
Elanor Investors Group
Stoic investment partner Elanor Investors Group published its Financial Year 21/22 results during the week. The Elanor Commercial Property Fund also issued its results.
Venture capital
An high profile tech entrepreneur and investor has returned to the Australian market with a new fund. Matt Berriman is reported as saying that the recent correction in valuations of private companies makes it a great time to launch a new venture capital fund, and that there are great ideas and market opportunities that are not impacted by the change in the macroeconomic environment.
The was further discussion this week about the downsizing wave that is going through startups, and the role that excessive valuations played in them getting ahead of themselves in upsizing operations.
Company Updates
Whiterabbit.ai
Stoic investee Whiterabbit.ai has signed a national distribution agreement to expand its AI-powered early cancer technology across Australia and accelerate breast cancer screening volume and compliance.
