We look at how the changes in China’s economy might impact Australia.
Although Q1 GDP data was better than expected, some analysts are predicting that Q2 may be less forgiving. One clue is the rising unemployment rate in 31 major cities in China.
A key question is how much China’s government can offset decelerating growth with fiscal and monetary support? Another critical variable is whether the government continues to pursue a zero-Covid policy, which contrasts with much of the rest of the world, which is increasingly learning to live with the virus. By some accounts, the longer China tries to stave off widespread infection, the bigger the eventual blowback when the policy is abandoned, as some analysts predict.
The pandemic has to be the biggest source of risk for China’s growth this year. And this has significant consequences for Australia.
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In this week’s market summary, we as usual start in the US, cover Europe and Asia and end up in Australia. This is because the US market trends drive other markets, like it or not. No market is an island – especially Australia.
Now, back in 2018, when the Fed was conducting quantitative tightening and increasing rates, US mortgage rates were around 5%, the dollar index was over 97.50, oil was trading at over $75, and the 10-year rate was around 3%. But the FED broke the markets, as the S&P 500 plunged by around 20%, and so they had to back-peddle from rate hikes. It first held them steady and then had to cut rates and restart QE by the autumn of 2019.
Just four years later, we again have mortgages rates over 5%, the dollar index is at 100, oil is trading over $100, and the 10-year rate is approaching 3%. On top of that, the Fed is now embarking on an even bigger rate hiking cycle and is very likely to conduct quantitative tightening at double the pace of the 2018 version.
CONTENTS
0:00 Start 0:15 Introduction 0:45 Fed And U Turns 3:00 Rate Rises and Policy Errors 4:40 USD 5:00 Gold 6:40 Bonds 9:15 US Economy 11:20 Reporting 12:05 US Markets 14:40 Oil 15:00 UK 15:55 Europe 17:30 Asia Inc.China 20:00 Australia 24:00 Bitcoin and Crypto 24:30 Summary and Close
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Something weird is happening, despite the strong rise in a pantheon of commodity prices, commodity exporters are not feeling the love in terms of currency appreciation. The currencies of commodity exporters—e.g. CAD, AUD, and NZD in the G10—have underperformed the rise in commodity prices themselves. So what’s going on? Well, Goldman Sachs had a good go at trying to explain what is happening.
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Today’s post is brought to you by Ribbon Property Consultants.
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Buying property, is both challenging and adversarial. The vendor has a professional on their side.
Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.
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Wall Street’s ended lower on Thursday, with the NASDAQ dropping more than 2%, as investors reacted to Federal Reserve officials including Chair Jerome Powell offering further signposting of aggressive interest rate hikes this year.
He outlined his most aggressive approach to taming inflation to date, potentially endorsing two or more half percentage-point interest-rate increases while describing the labor market as overheated.
“I would say that 50 basis points will be on the table for the May meeting,” Powell said at an IMF-hosted panel on Thursday in Washington that he shared with European Central Bank President Christine Lagarde and other officials. He said demand for workers is “too hot — you know, it is unsustainably hot.”
Australian shares dropped 1.4 per cent, or 108.5 points, to 7484.3, in early trade, tracking Wall Street and pulling away from a near record high on Thursday.
Ten out of the index’s 11 categories fell with materials the biggest laggard down 3.5 per cent. Industrials stocks were unchanged.
The major banks and mining giants were also under pressure. The AUD was down a little to 73.64. This continues a decoupling if the AUD and commodities, which is worth a more detailed separate post.
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Before each federal election, the heads of the Commonwealth departments of treasury and finance release a report on the state of the government’s budget, together with updated economic forecasts. It is known as the pre-election fiscal and economic update, or PEFO.
Before PEFO was introduced in 1998, when a government changed hands it was routine for the newly-elected government to renege on its promises by saying something along the lines of: …we are shocked, just shocked! We had no idea how bad the country’s finances were!
PEFO has done away with that excuse forever. It means both sides of politics know the state of the books going into the election.
Parties’ promises are made with that full knowledge. Incoming governments no longer have a budgetary policy excuse for dropping their promises.
Today’s post is brought to you by Ribbon Property Consultants.
If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.
Buying property, is both challenging and adversarial. The vendor has a professional on their side.
Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.
Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.
Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.
The New Zealand consumers price index increased 6.9 percent in the March 2022 quarter compared with the March 2021 quarter, the largest movement since a 7.6 percent annual increase in the year to the June 1990 quarter, Stats NZ said today.
The 6.9 percent increase follows an annual increase of 5.9 percent in the December 2021 quarter, the previous largest annual movement since the 7.6 percent increase in the June 1990 quarter.
The main driver for the 6.9 percent annual inflation to the March 2022 quarter was the housing and household utilities group, influenced by rising prices for construction and rentals for housing.
Prices for the construction of new dwellings increased 18 percent in the March 2022 quarter compared with the March 2021 quarter, the largest increase recorded since the series began in 1985.
Construction firms have been experiencing many supply-chain issues, higher labour costs, and also higher demand, which have pushed up the cost of building a new house.
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We are back! After a 10 month gap, Economist John Adams and Analyst Martin North return to the studio to examine the current state of play of the election campaigns and more broadly where Australia is headed. How can we unleash the true potential for the country? We need new blood and new ideas…
Join us for a live discussion as I explore the latest in market trends with Tony Locantro from Alto Capital in Perth. Given recent market falls, rises in interest rates in many Western countries, and easing of home prices, how should be read the current markets, and prepare for the next wave?
Alto Capital is a full service investment and corporate advisory firm.
You can ask a question live.
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The rental situation is getting worse across the country driven by the pandemic-induced shrinkage in average household size as people demanded more space. This has effectively reduced the number of homes available to rent.
Plus many investors are lifting rentals to try to turn unprofitable investments positive (especially as capital gains on many apartments remains a pipe-dream).
CoreLogic reported that rents across Australia continue to explode, surging by 8.7% nationally and by 10.7% across the combined regions in the year to March 2022.
With rental growth (2.6%) outperforming value growth (2.4%) over the three months to March, national dwelling yields have recorded a one basis point rise since December (3.22%) and two basis points since reaching a new record low of 3.21% in January and February. Despite the recent rise, national rental yields are still 32 basis points below the yield recorded this time last year (3.55%).
But BTR is another fake ‘affordability’ policy as a new report in The AFR suggests recent Australian BTR projects charging a 20% premium on traditional rentals.
Its frankly a mess, with long standing consequences for households across the country. Its shameful.
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.
Buying property, is both challenging and adversarial. The vendor has a professional on their side.
Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.
Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.
Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.
Edwin visited me in the DFA studio today for our weekly property chat. We discussed the political ball game around property, news from China about migration to Australia, and how to react to the latest market information.
Is there a path to higher home prices ahead?
Go to the Walk The World Universe at https://walktheworld.com.au/
