Weekly Market Recap

This is not an exit

13/09/2021

Week in review

RBA starts to taper bond purchases, lowering to $4bn per week
ECB plans to taper emergency purchases from €80bn to €60bn
U.S. job openings reach new high at 10.9 million

Week ahead

Australia business and consumer confidence
Australia labour market report
U.S. CPI inflation

Thought of the week

Momentum in global growth has unexpectedly softened in recent months. Persistent supply chain disruptions are hampering production, slowing spending and delaying inventory restocking. Drags in the shipping industry are exacerbating these bottlenecks. Meanwhile, concerns around COVID-19 cases are weighing on the service sector recovery. Despite the concerns about the moderation in global activity, central banks are lining up to exit from super-loose monetary policy and ballooning balance sheets. Doing so in the current climate makes communication a challenge with many central banks opting for a ‘dovish taper’ approach. This involves starting the process of policy normalisation in an ever so gradual manner, best illustrated by the RBA’s elongated tapering of its bond purchases announced last week. The current slowing in the economy will be temporary and central banks will be eager to begin the very slow journey back to normal settings.

Central bank balance sheets

% of nominal GDP

Source: Bank of England, European Central Bank, FactSet, RBA, U.S. Federal Reserve, J.P. Morgan Asset Management. Data reflect most recently available as of 08/09/21.
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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