Weekly Market Recap
Mr Brightside
01/02/2021
Week in review
- Australian CPI inflation rate 0.9% q/q in 4Q20
- Australian business conditions rises to 14.2 for December
- U.S. real GDP 4.0% q/q annualized in 4Q20
Week ahead
- China PMI manufacturing
- RBA meeting and interest rate decision
- U.S. labour market report
Thought of the week
Australia’s near-term economic prospects continue to improve. Sentiment among consumers and businesses is on the rise, the unemployment rate is falling and fourth quarter inflation was stronger than expected. However, this won’t be enough to move the RBA when they meet this week. While the economy is getting back on its feet faster than forecast just a few months ago, the medium-term prospects haven’t changed and this is what the RBA is focused on. The unemployment rate is likely to remain some way from the RBA’s full employment target even as survey based measures improve (see chart). Meanwhile, inflation may get a lift in the coming quarters from the low base effects from 2020 but probably won’t be considered a sustainable move higher by the RBA. There is a lot of good in the outlook for the Australian economy but not yet enough to really unwind the dovish view of the central bank and their long held belief of an ‘unpredictable and uneven’ recovery in 2021.
Australian jobs outlook continues to improve
Source: ABS, NAB, J.P. Morgan Asset Management. Data reflect most recently available as of 28/01/21.
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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