Weekly Market Recap
Week in review
- RBA hold rates at 0.1% extends QE by $100bn
- Australia housing finance up 8.6% m/m
- Eurozone real 4Q20 real GDP -5.1% y/y
- Australia business confidence
- Australia consumer confidence
- U.S. CPI inflation
Thought of the week
The RBA’s new motto may be carpe diem, or seize the day, as they surprised many with an earlier than anticipated $100bn extension to the quantitative easing (QE) program. Forward guidance was also strengthened, and interest rates will not rise until 2024 at the earliest according to the RBA. The extremely dovish view on rates and need for ongoing monetary policy support contrasted the good news on the economic outlook, at least for growth. The RBA expects that the economy will return to its pre-COVID level by the middle of this year. Despite the looming bond purchases the yield on Australian 10-year government bonds has jumped to its highest level in almost a year on the better growth outlook. The RBA may have seized the day but will be acutely aware of the consequences of running rates for too low for too long in an economy with already very high household leverage. In the meantime, the continued economic recovery and rising bond yields bodes well for the outperformance of banks and the financial sector.
Rising yields good for bank performance
JPMorgan Global Research Enhanced Index Equity Fund
To achieve a long-term return in excess of the benchmark by investing primarily in a portfolio of companies, globally; the risk characteristics of the portfolio of securities held by the Sub-Fund will resemble the risk characteristics of the portfolio of securities held in the benchmark.