Weekly Market Recap
Australia
08/06/2020
Week in review
- Australia contracted by 0.3% in 1Q (1.4y/y)
- Retail sales for April fall by 17.7%m/m
- ECB announced another EUR600bn in bond purchases
Week ahead
- Australia business and consumer confidence
- Australia housing finance
- US FOMC meeting
Thought of the week
Global equities continued to rally last week as the ‘things are less bad’ trade continued. The economic outlook is becoming ‘less bad’ as COIVD restrictions are eased and spending picks up but that still doesn’t equate to things being good. The economic draw down is likely to be as large as that experienced during the GFC and given the impact on the services sector a larger amount of economic output which is lost will not be recovered. However, markets are forward looking preferring to focus on the potentially shorter duration of any recession and fiscal and monetary largesse to keep equities higher. This week’s chart shows the peak to trough decline in forward earnings per share in the GFC and the current period. A decline in the earnings outlook could unwind the ‘not bad’ trade.
Not bad meaning bad, but bad meaning good
Decline in forward earnings per share
Source: Standard & Poors, MSCI, FactSet, J.P. Morgan Asset Management, all returns in local currency unless otherwise stated.
Equity price levels and returns: Levels are prices and returns represent total returns for stated period.
Bond yields and returns: Yields are yield to maturity for government bonds and yield to worst for corporate bonds. All returns represent total returns. AusBond Comp is the AusBond Composite 0+ Yr, AusBond IG is the AusBond Credit 0+ Yr both provided by Bloomberg.
Currencies: All cross rates are against the Australian dollar. An appreciation of the foreign currency against the Australian dollar would be positive and a depreciation of the foreign currency against the Australian dollar would be negative.
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