Weekly Market Recap

Wind of change

28/02/2022

Week in review

Australia wage growth up 2.3% in 4Q21
U.S. and Eurozone composite PMIs rose to 56.0 and 55.8 in February
RBNZ hikes interest rates 25bps to 1.00%

Week ahead

U.S. nonfarm payrolls and labour market report
Australia preliminary retail sales for January
RBA official cash rate and board meeting

Thought of the week

The release of the closely watched PMI business surveys last week were a bright spot in what has been a dark market mood. The lift in services activity in February suggests that the lingering impact of Omicron is very much fading away in developed markets. This validates the view of a robust economy and rationale of central banks to move on with raising interest rates. What these surveys may not yet capture is the fallout from the situation in Ukraine. Economists are trying to assess the impact of higher oil prices on the outlook for the economy. A surge in oil prices would represent a significant adverse supply shock, dampening the growth outlook and pushing headline rates of inflation higher. To some extent it’s the pace of change which matters rather than the final level. Between 2011 and 2014 the price of oil hovered around $100 for an extended period of time without causing too much economic fallout. This is because markets and the economy can adjust to slower moving factors without too much disruption. Sentiment indicators will need to be closely watched to see whether oil or omicron wins out.

Fading the Omicron wave

Developed market PMI output indices

Source: Markit, J.P. Morgan Asset Management. Data reflect most recently available as of 02/02/22.
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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WEEKLY MARKET RECAP

Weekly Market Recap 20230522

Tide’s is turning on employment : The surprise jump in the unemployment rate maybe a signal of things to come

Weekly Market Recap 20230515

SLOOS you lose : Evidence of further tightening in lending conditions part of a losing formula for the U.S. economy

Weekly Market Recap 20230508

Are they done? : That may have been the last hike from the U.S. Fed and RBA.

Weekly Market Recap 20230501

Shifting sands of Australian inflation : Australian inflation has peaked but the path downward will still be gradual

Weekly Market Recap 20230424

What does the 1Q23 economic data mean for China? : This week’s CHART and THOUGHT look at China’s 1Q23 economic data and implications on China’s upcoming earnings.

Weekly Market Recap 20230417

No loosening in the labour market : Australia’s labour market is very tight, but leading indicators suggest softening ahead.

Weekly Market Recap 20230403

What’s my rate again?: Markets are debating whether the Fed will push the policy rate over 5%, but the actually policy rate may already be over 6%.

Weekly Market Recap 20230327

Lending standards and the Fed: Credit is oxygen to the economy, restrict it and growth will suffocate

Weekly Market Recap 20230320

Sticky shelter costs: Slow moving property market means U.S. will not hit inflation target this year

Weekly Market Recap 20230313

Blowing through the buffer: The savings rate has fallen to pre-pandemic levels increasing the pressure on household spending habits.

Weekly Market Recap 20230306

Blowing through the buffer: The savings rate has fallen to pre-pandemic levels increasing the pressure on household spending habits.

Weekly Market Recap 20230227

Good news is bad news : A resilient economy comes at a cost, higher rates

Weekly Market Recap 20230220

Not bothered : Australian business conditions ticked higher in January, but will it last?

Weekly Market Recap 20230213

Take me higher : Rates are going higher but just how much is still up for debate.

Weekly Market Recap 20230206

Looking for the bright side : Equities have a romantic view of the outlook but may not love corporate earnings.

Weekly Market Recap 20230130

Hard vs soft landing : The rally in equities suggests the market is discounting the chance of a U.S. recession. Is this time really different?

Weekly Market Recap 20230130

Sticky vs flexible inflation : Falling inflation is helping markets to rally, but the sticky parts of the inflation basket are yet to move

Weekly Market Recap 20221219

Margin call : How far will companies go to protect margins?

Weekly Market Recap 20221212

Higher ground : Waiting on the U.S. Fed to signal where they think rates will go in 2023.

Weekly Market Recap 20221205

Second hand news : The monthly inflation series suggests inflation is peaking, but this won’t change the outlook for the RBA this week.

Weekly Market Recap 20221128

Recession is coming: The recession is coming, but not everywhere and not all at once.

Weekly Market Recap 20221121

Takin’ care of business : Inflation may be starting to roll-over but unemployment rates really yet to rise, central banks have more to do

Weekly Market Recap 20221114

My own two hands : The size of U.S. rate hikes may be about to get smaller, but the ending policy rate may be higher.

Weekly Market Recap 20221107

My own two hands : The size of U.S. rate hikes may be about to get smaller, but the ending policy rate may be higher.

Weekly Market Recap 20221031

Under pressure : Domestic inflation pressures rose sharply in the third quarter, but it’s a case of slower not lower for the RBA.

Weekly Market Recap 20221024

Hey now, you’re an all-star : Restrained supply may be one reason credit spreads are not wider, but this won’t last.

Weekly Market Recap 20221017

Ready for the fall : Earnings expectations are yet to catch up to the market, this may change in the current U.S. earnings season

Weekly Market Recap 20221010

sLOWEly does it : Pivot and pivot again, a smaller than expected RBA rate hike last week raised markets hopes for the peak in hawkish central banks.

Weekly Market Recap 20221003

Times like these : The aggressive repricing of rates is tightening financial conditions much faster than prior rate hike cycles

Weekly Market Recap 20220926

Fasten your seatbelt for a bumpy ride: Looking at the Fed’s recent rate hike and the current economic outlook.

Weekly Market Recap 20220919

I’ve got the power : Fiscal support is picking up in Europe as governments try to keep the lights on

Weekly Market Recap 20220912

Nothing comes close : How close is close enough for central banks when it comes to getting inflation back to target

Weekly Market Recap 20220905

The heat is on : A big week for central banks as the market grapples with higher for longer when it comes to interest rates

Weekly Market Recap 20220829

That don’t impress me much : The U.S. may avoid recession, but don’t expect a lot of growth from the world’s largest economy.

Weekly Market Recap 20220822

Castles made of sand : Chinese stocks have been left out of the bear market rally, when will sentiment turn for the better?

Weekly Market Recap 20220815

Castles made of sand : Chinese stocks have been left out of the bear market rally, when will sentiment turn for the better?

Weekly Market Recap 20220808

Are you gonna go my way : Up or down? Business surveys are providing conflicting messages on the health of the U.S. economy.

Weekly Market Recap 20220801

Is this it? : Growth is taking over from inflation has driving force for yields. Is this it for higher yields or just a pause?

Weekly Market Recap 20220725

Some don’t like it hot : Inflation continues to run ahead of forecasts, keeping pressure on central banks to deliver outsized rate hikes.

Weekly Market Recap 20220718

Are we there yet?: U.S. inflation is rising, but bond yields are falling. Do recession risks mean that we’ve passed the peak in yields?

Weekly Market Recap 20220711

What to expect when you’re expecting : Market based measures of inflation expectations are softening, but may not be enough for rate setters

Weekly Market Recap 20220704

When the spending stops : Consumers not confident, but still spending

Weekly Market Recap 20220627

Not yet the house of pain: Housing activity in the U.S. is slowing but lack of inventory will support prices and household wealth.

Weekly Market Recap

Rumour has it : The leaked guidance by the U.S. Federal Reserve pushed up rate expectations, and suggests a more aggressive pace of rate hikes to come.

Weekly Market Recap 20220613

A show of wealth : A cooling housing market and rising rates may lead to many Australian feeling less wealthy.

Weekly Market Recap 20220530

Stuttering not stopping : Economic data out last week points to a slide in activity in developed economies rather than a stall.

Weekly Market Recap 20220523

Don’t step on the crack : Markets are pricing for a recession which may not come, but some cracks are starting to appear in the riskier parts of the credit market.

Weekly Market Recap 20220516

Rocky mountain high : U.S. inflation is still running hot, rocking markets last week, but we may be passing the peak in both inflation and central bank hawkishness.

Weekly Market Recap 20220509

Higher ground : Central banks are acting to catch up to the inflation outlook and willing to front load rate hikes, but this may not lead to a soft landing for the economy.

Weekly Market Recap 20220502

The heat is on : The strong inflation reading for Australia should be enough to spur the RBA into action this week, but only slowly.

Weekly Market Recap 20220425

Off target : Inflation pressures are building more slowly across Asia, and some central banks are responding, but the normalisation path will be relatively gradual.

Weekly Market Recap 20220411

Tired of waiting for you : The RBA has signaled that higher rates are coming, but the market remains far ahead of what may be delivered.

Weekly Market Recap 20220404

Dealing with distortion : Rising yields hide the very negative real yields underneath as the distortion in bond markets grows

Weekly Market Recap 20220328

Fighting back with fiscal : Europe’s probability of recession is predicated by governments willingness to spend.

Weekly Market Recap 20220321

False start for recession : Flattening yield curves and falling sentiment gaps maybe signaling a false start to a recession.

Weekly Market Recap 20220314

Uneven impact of rising commodity prices: Rising commodity prices are a headwind for some, and a tailwind for others.

Weekly Market Recap 20220307

The impact of Russian default on global banking system should have limited effects on the global financial system.

Weekly Market Recap 20220221

Under pressure: Core rates of inflation continue to rise in many developed markets, will central banks come out fighting with big rate hikes?

Weekly Market Recap 20220207

The de-rating of equities in the face of tighter monetary policy is weighing on markets, but valuations should find a footing once this recalibration process is complete.

Weekly Market Recap 20220131

Not as bad as you think.

Weekly Market Recap 20220124

Turn it around: This week’s thought and chart look at the improving sentiment in the manufacturing sector and why the momentum in the economy shouldn’t be underestimated.

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