Finance Market News and Tips – August 2016

Markets at a glance

Financials markets have trended higher throughout July and early August. This comes despite lower growth and mixed corporate earnings. ‘Brexit’ concerns now seem a distant memory with markets retracing losses, most notably the US at record highs. Across the board, interest rates are tipped to be ‘lower for longer’ as global authorities double down on stimulus efforts.

Interest rates & the Economy:

Earlier this month, the RBA cut rates to a record low of 1.5%. The main concern is not so much economic growth but rather making sure below trend inflation doesn’t become entrenched.

The June quarter CPI result was the key event for Australian markets with the headline rate coming in at the lowest level since 1999 – CPI rose just 1% in the year to June.

The RBA has indicated it doesn’t see inflation coming back significantly towards it target range of 2-3%. This means they will likely cut again, possibly in November (after an assessment of September quarter inflation has been made).

Also of note, Australian 10 year bonds reached a record low of 1.83% during the month.

Other macro-economic data included:

Residential building approvals fell a larger than expected 5.2% for the month of May.

The NAB survey of business conditions rose strongly in July, to 12.0 from 9.7.

The Westpac Melbourne Institute Index of Consumer Sentiment increased by 2.0% from 99.1 in July to 101.0 in August.

Lower wage growth persists, with growth at 2.1% for the 2016 financial year.

On the property front, valuations were mostly higher for the 12 months ending July, with the exception of Perth and Darwin:

year to date change in dwelling value charts

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