St George Economics economy and finance update

Share Markets:

Despite mixed economic news out of the US and Europe (see below), equities rose in both sets of markets.

A pick-up in US factory orders combined with solid expectations for US job growth figures on Friday set the tone.

The FTSE rose 1.2% while the Dax gained 1.9%.

The US, the Dow rose 0.6%.
 

Bonds:

In line with the movements away from safe haven assets, treasury prices in the US and Germany fell (yields rose).

Yields remain above the lows seen during 2012. In line with the improvement in sentiment, Greek 10 year bond yields were down 21bp, Spanish equivalent yields were down 12bp and Italian 10 year yields fell 14bp.

Portuguese debt, however, continued to be sold. 
 

Foreign Exchange:

The AUD traded marginally weaker against the USD overnight but opens higher today than yesterday.

Similar movement was seen against the yen, euro and the pound with the AUD gaining ground.
 

Commodities:

Gold prices fell as funds moved towards equities.

The price of copper was also down as traders focused on the weak European data.

West Texas crude oil was little changed overnight.  
 

Australia:

The RBA left its official cash rate unchanged at 3.00% yesterday.

It also appeared to leave in place its easing bias noting that growth is likely to be a little below trend in the year ahead.

According to RP Data Rismark, house prices across Australian capital cities rose 1.4% in March to be up 2.5% over the year.

Unit prices rose 0.7% in the month and 2.0% over 12 months.

Rental yields for houses were reported at 4.1% and at 4.9% for units.

In other news, the AiG performance of manufacturing index fell from 45.6 in February to 44.4 in March indicating that the manufacturing sector continues to struggle.
 

Europe: 

Eurozone unemployment reached a new all-time high of 12% in revised January data and held there in February.

A steady German jobless rate at 5.4% contrasted with higher French (10.8%) and Spanish (26.3%) unemployment rates although Italy slipped a touch to 11.6%.

Also the factory PMI was revised from 46.6 to 46.8 in March, down from 47.9 in February.

It has been running at sub 50 contractionary levels since August 2011, more or less corresponding to the period of shallow, drawn out recession that officially began in the fourth quarter of that year.

German CPI edged down from an annual rate of 1.5% to 1.4% in the preliminary March report, its lowest since 2010.

Cyprus now has until 2018 to implement its budget deficit reduction program, extended from 2017, after talks between the finance minister (who subsequently resigned) and the troika of ECB/EU/IMF officials finalising the detail of the revised bailout plan.
 

United Kingdom:

UK factory PMI rose from 47.9 to 48.3 in March, remaining in the contractionary sub 50 zone after two 50+ readings at the turn of the year in December-January.

Other data included a fall in new mortgages approved from 54.2k in January to 51.7k in February, its lowest since Sep last year.
 

United States:

US factory goods orders rose 3% in February with a 0.8% rise in non-durables combining with the 5.6% jump in durables orders.

US ISM-NY fell from 58.8 to 51.2 in March, replicating the declines in this index seen in the first half of 2012 and 2011 after an early year surge, that we suspect is more to do with seasonal adjustment issues than with underlying swings in economic activity.

 

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The information contained in this report (the Information) is provided for, and is only to be used by, persons in Australia. The information may not comply with the laws of another jurisdiction. The Information is general in nature and does not take into account the particular investment objectives or financial situation of any potential reader. It does not constitute, and should not be relied on as, financial or investment advice or recommendations (expressed or implied) and is not an invitation to take up securities or other financial products or services. No decision should be made on the basis of the Information without first seeking expert financial advice. For persons with whom St.George has a contract to supply Information, the supply of the Information is made under that contract and St.George's agreed terms of supply apply. St.George does not represent or guarantee that the Information is accurate or free from errors or omissions and St.George disclaims any duty of care in relation to the Information and liability for any reliance on investment decisions made using the Information. The Information is subject to change. Terms, conditions and any fees apply to St. George products and details are available. St.George or its officers, agents or employees (including persons involved in preparation of the Information) may have financial interests in the markets discussed in the Information. St.George owns copyright in the Information unless otherwise indicated. The Information should not be reproduced, distributed, linked or transmitted without the written consent of St.George.


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