Australian Economy – In a surprise to some, the RBA decided in its February meeting to cut the target cash rate to a record low of 2.25%. Not surprisingly, this was followed by the news that the unemployment rate had kicked up to 6.4%1, a 12 and a half year high.
Global Economy – Another 257,000 in new jobs2 in the US offset other softer data, as the US economy continues to hold the high ground. In Europe, the quantitative easing experiment has started to gain further traction, as relief settled in over pleasing Greek debt negotiations. China also continued with its less restrictive monetary policy stance, lowering lending rates and cash reserve requirements for banks.
Investment Markets – The Australian share market surged over 6% on the back of the RBA's rate cut announcement, with resource stocks surging about 12%3. Most other global markets also enjoyed solid gains, with overall global equities above over 5%3 for the short month of February.
Outlook –The lower $A and interest rates have helped Aussie shares outperform most counterparts over the past few months. With global market values hovering above decade highs, and with the US Federal Reserve expected to start raising rates, the sustainability of these lofty share price levels are likely to be tested throughout the year.
S&P/ASX 200 – 12 months to 28 February 2015
Source: Core Equity Services
Footnotes: 1. Data from Australian Bureau of Statistics; 2. Dept of Labour, USA; 3. Bloomberg data.