ABX Weekly 21/08/2019

Market Update  

 

Analysing the recently released minutes of the RBA’s Monetary Policy meeting in August we can see that the Board has grown more concerned over the outlook of global growth. Notably comments of: “trade and technology disputes had increased the downside risks to the global outlook”, “uncertainty around trade policy had already had a negative effect on investment in many economies”, and “a number of central banks had reduced interest rates this year and further monetary easing was widely expected”. This has the RBA worried. Sleepless nights type of worried. Whether you agree with their assessment or not they foresee strong headwinds hitting Australia from all over the world. While our economy has been doing much better than the rest of developed countries, we are just a small part of the economic system and won’t be immune to any market downturn. 

 

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US Market Focus 

 

Market expectations for future rate cuts by the Fed amid renewed trade tensions have led to an increased spotlight on the Kansas City Fed’s annual economic policy symposium being held at Jackson Hole this week. The topic of the conference is “Challenges for Monetary Policy”. 

 

 

Trump’s latest Tweet: 

 

The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well. If that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced-good for everyone! 

 

European Desk: 

 

Germany has put a number on the size of a possible fiscal stimulus package for the first time, saying it could muster 50 billion euros ($55 billion) of extra spending in an economic crisis. 

 

While Finance Minister Olaf Scholz has given no indication that such a package is imminent, it does highlight the increasing pressure on the administration now that it’s clear the economy shrank in the second quarter and the recession risk is growing. 

 

The government has run a budget surplus for the past five years and cut its debt burden to the lowest since before the financial crisis, giving it room to spend. The administration is ready to run a deficit should the economy collapse, Der Spiegel reported on Friday.