Australian Bond Exchange

ABX weekly 24/04/2019

Market Update  


Officials in Beijing signalled they are less comfortable adding further stimulus to the economy, leading to losses over the past two days for some of the world’s hottest markets. The CSI 300, which had surged almost 40 percent this year on the back of policy loosening, fell further overnight after dropping 2.3 percent on Monday. The tumble comes even as optimism over a trade deal between China and the U.S. remains very high.  


Big news out of the US was the wake of the Mueller report. Democrats remain split over whether to pursue impeachment proceedings against President Donald Trump, so far the calls for impeachment have mostly been made by Democrat presidential candidates, while the party’s members in Congress are more likely to favour a series of hearings with Robert Mueller and Attorney General William Barr in order to keep the pressure on Trump. 


Easter holidays has kept market movements relatively quiet with oil the biggest mover. Oils gains comes from the Trump administration to end the ban of Iranian oil exports attempting to increase pressure on the Tehran regime. 


On the domestic side we had soft inflation numbers which caused a big fall in bond yields once again which is in stark contrast to the equity market which is getting closer to all-time highs. We have once again the yields from the 1 to the 6-year government bonds below the RBA cash rates of 1.5% and the A$ falling from a recent high of close to $72 back to $70.30. Many market commentators are again calling for a rate cut in May which would be very unusual during an election campaign. In addition, the fall in the A$ combined with the very low unemployment numbers in New South Wealth and Victoria should give the RBA confidence to keep rates on hold for a while longer.    


European Desk 



For once the Brexit news pipeline has gone very quiet and I thought I use this to report on another European flash point which is Turkey.  The recent news that the Turkish Central Bank was tweaking its forward guidance caused once again the lira to tumble with the currency down more than 6% so far this month. The Governments defence, according to Bloomberg has cost the Central Bank between $10 and $ 15 billion in just the last few weeks of March fuelling concern about the state of the nation’s finances. Meanwhile, price pressures continue to increase, and it stands currently nearly four times the official rate of 5% with the economy not surprisingly entering its first recession in a decade last year.