Australian Economy – Another hold on interest rates from the RBA did not stop the banks from making their own rate decisions. With Westpac leading the way and sighting overseas credit pressure, the banks raised mortgage rates effectively reversing the cut by the RBA in May. This is likely to help subdue rampant property prices, with most capital cities already showing signs of a price correction.
Global Economy – Despite good jobs and wages data, the Federal Reserve decided once more to leave interest rates on hold2. Down in DC, congress were able to strike another budget and debt ceiling deal, ensuring the spectacle of a Government shutdown would not occur. Data out of Europe was mainly poor, with manufacturing flat and inflation just hitting 0%. And the Chinese and Japanese economies are also struggling to lift growth.
Investment Markets – The sliding markets of September rebounded strongly through October. Most markets picked up their recent losses, with China and Europe jumping about 10% and the U.S. up over 8%. Australian equities did not receive the same boost, with markets making back about 4%.3.
Outlook – Risks of a slowing global economy seems to have flowed through markets over the past few months, lifting volatility and causing equity markets to struggle for returns. A prolonged downturn in activity is likely to be greeted with further stimulus from Europe, China and Japan, however, it is unlikely that the Federal Reserve will entertain another foray into quantitative easing.
S&P/ASX 200 – 12 months to 31 October 2015
Source: Core Equity Services
Footnotes: 1. Data from Australian Bureau of Statistics; 2. Dept of Labour, USA; 3. Bloomberg data.