Weekly Market Recap

Consumers less confident

03/08/2020

Week in review

Australia inflation -1.9% q/q
U.S Fed holds rates, but warns on economic outlook
Australia building approvals falls 4.9% m/m

Week ahead

RBA policy setting meeting
China Caixin PMI manufacturing
U.S. labour market report

Thought of the week

The rise in new cases of COVID-19 in pockets around the world is the greatest risk to the economic recovery and is a reason why the rise in consumer confidence has stalled after a sharp rebound from the May low. This matters because for developed economies like Australia, the U.S. and the eurozone household spending accounts for between 55%- 70% of GDP when looked at by expenditure. A happy, healthy consumer that is willing to spend is always good for the economic outlook. The softening in sentiment may limit the release of the pent up demand created when households were under the more strict containment measures. While the July data does not make a trend there is a risk that the expected bounced in economic activity in the third quarter will be smaller than first anticipated. However, this should be thought of as a recovery delayed rather than a recession extended.

I get locked down, but I get up again
Consumer confidence, z-score

Source: Conference Board, European Commission, Westpac, 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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