Weekly Market Recap
Balancing act
15/07/2024
Week in review
- U.S. CPI index inflation falls to 3.0% y/y
- RBNZ holds rates at 5.5%, but dovish messaging
- Australian consumer confidence slips further to 82.7
Week ahead
- China 2Q real GDP
- U.S. retail sales
- Australia labour market report
Thought of the week
Last week, Jerome Powell appeared before Congress for his semi-annual testimony. While he remained tight-lipped on the prospect of a rate cut, his tone suggested a more dovish outlook on the economy. The Fed has a dual mandate; to maintain price stability (inflation at target) and full employment. High inflation has understandably taken centre stage, Powell’s comments indicate a shift in focus towards the labour market. He described the labour market as “in balance”, perhaps a nod to the chart below. Despite the unemployment rate remaining very low, suggesting a tight labour market, by historical standards, the ratio of unemployed to job openings has returned to its pre-pandemic levels. This suggests a more balanced supply and demand for labour, potentially leading to further moderation in wage growth and increasing the chance that the Fed begins to ease policy come September.
U.S. labour maket moving back into balance
Vacancies as a share of unemployed
Source: FactSet, U.S. Department of labour, J.P. Morgan Asset Management. Data reflect most recently available as of 12/07/24.
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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