The Experts

James
Craig James
Economy Expert
+ About Craig James
About Craig James

Craig James is CommSec’s Chief Economist.

On leaving school Craig James joined the (then) Rural Bank, whilst undertaking university studies. He received his Bachelor of Commerce (Economics) at University of NSW in 1984 and then a Master of Commerce (Economics) at the same university in 1988.

He remained at the Rural Bank, which became the State Bank over time and then Colonial, working in branches, Corporate, Planning and Economic Research.

He became chief economist of Colonial Group in September 1987, before becoming chief economist at CommSec in August 2000 with the Commonwealth takeover of Colonial.

In 2002 Craig had a sea-change, joining the Australian Financial Review. He had always wanted to pursue a role in journalism and enjoyed the role as an economic commentator and analysts, finding that he could pursue a journalistic-type role as well as doing more electronic media work at CommSec and rejoined the group in 2003.

On taking the reigns of chief economist at Colonial, Craig endeavoured to style their research in a “user-friendly” way – something that set their research apart and still does today. The approach has been successful in their media work and in promoting Colonial, and then CommSec, to the general public. CommSec is the most quoted economic group in the mainstream media.

CommSec economic reports are a bit different in that they devise tools such as the ‘Mums and Dads’ share index and the iPod index, and undertake research on the weather and demographic changes to show how they affect the economy.

Craig currently does around 2-3 regular TV crosses a day, ad hoc radio and newspaper interviews and writes regular commentaries as well as presenting to staff, clients and external organisations.

Outside work, Craig's main interests are athletics (cross country in winter), weight training, reading widely across a range of newspapers, magazines and electronic media, and trying to keep up with the children.

Australia: Inflation data in focus

Thursday, April 18, 2019

On Wednesday

The week kicks off on Wednesday when Australian Bureau of Statistics releases the CPI data together with detailed jobs data for March. Also, the weekly consumer sentiment index is issued by ANZ and Roy Morgan. And the Department of Employment releases March data on skilled job vacancies. Furthermore, the latest figures show an easing of skilled job vacancies. But the question is (and this applies also to the ANZ job advertisement series) is whether the vacancies series are picking up the trend to list jobs on LinkedIn and individual company websites rather than job search websites.

But the spotlight on Wednesday, is firmly on the CPI data for the March quarter. The key inflation figures are only released once a quarter, rather than each month as they are in a raft of advanced economies. So, the data takes on special importance – especially as current and prospective inflation guides Reserve Bank policymaking.

The ‘headline’ CPI is tipped to lift by just 0.2% in the March quarter, dragging the annual rate down from 1.8% to 1.5%. A key factor keeping inflation low is petrol – fuel prices fell by around 9% in the March quarter, taking around 0.2 percentage points off the quarterly CPI growth.

In the March quarter there are seasonal increases in education fees, alcohol & tobacco (higher excise tax) and pharmaceutical product prices (changes to the safety net threshold for Pharmaceutical Benefits Scheme and Medicare Benefits Scheme). And there is a seasonal fall in the cost of overseas holiday travel & accommodation.

Also, on Wednesday, the underlying CPI measures are expected to have lifted by around 0.4% in the March quarter with the annual growth rate easing from 1.8% to 1.7%.

On Thursday

Both the Producer Price Indexes (business inflation) and International Trade Price Indexes (export & import prices) publications are released.

Overseas: US housing market in focus

A raft of data covering the US housing market is released in the coming week. Investors will also be focussed on the personal income/spending data on Friday.

On Monday

The week begins on Monday in the US when the Chicago Federal Reserve releases the March reading of the national activity index. The index has fallen in four of the past five months. Also, on Monday in the US, data on existing home sales is released for March. In February, sales soared by 11.8% to an 11-month high so analysts expect some correction in the April results, perhaps down around 6%.

On Tuesday

The regular US weekly data on chain store sales is scheduled along with the monthly data on house prices, new home sales and the influential Richmond Federal Reserve manufacturing index. Also, Tuesday saw the house price data is issued by the Federal Housing Finance Agency. In January, prices rose by 0.6% – the strongest reading in 11 months. And just like existing home sales, new home sales may have slipped in March after a solid 4.9% gain in February.

On Wednesday

The only data of note in the US is the regular weekly reading on new mortgage applications. As would be expected, applications (especially refinancing) fluctuate in line with changes in average fixed 30-year mortgage rates. Applications soared in March as yields fell but have lending has eased in April.

On Thursday

Figures for durable goods orders are released with the Kansas Fed manufacturing index and the usual weekly data on claims for unemployment insurance. Durable or long-lasting goods are those goods expected to last three years or more – goods like cars and aircraft. New orders fell by 1.6% in February but rose 0.1% if transport goods are excluded. Analysts tip a 0.4% lift in March orders.

On Friday

The first (“advance”) estimate of US economic growth for the March quarter is expected. Economic growth slowed from 3.4% to 2.2% in the December quarter. Apart from economic growth, investors will also be focussed on inflation readings – namely the core personal consumption expenditure deflator. This is the inflation measure favoured by Federal Reserve policymakers. Also, on Friday, US data on wholesale inventories is issued with the second (final) reading of consumer sentiment for the month of April. The index on the outlook for consumer finances is at 14-year highs.

Financial markets

On Monday

Haliburton, Kimberley-Clark

On Tuesday

Coca Cola, Harley Davidson, Jet Blue, Lockheed Martin, Procter & Gamble, Texas Instruments, Twitter, Verizon.

On Wednesday

AT&T, Boeing, Caterpillar, Domino’s Pizza, Goodyear, Novartis, Advanced Micro, Facebook, Wynn Resorts, Microsoft, Tesla, Visa. 

On Thursday

3M, American Airlines, Comcast; Nokia, Amazon, Intel, Ford.

On Friday

Chevron, Exxon Mobil, Colgate-Palmolive, Sony.

 

Good morning, Australia

Monday, April 15, 2019

How’dy USA

In US economic data, export prices rose 0.6% in March (forecast +1.1%) with import prices also up 0.6% (forecast +0.4%). Consumer sentiment eased from 98.4 to 96.9 in April (forecast 98).

US share markets were firmer on Friday. Investors were encouraged by earnings from JP Morgan Chase (shares up by 4.7%). Financials rose 1.9%. Shares in Walt Disney rose 11.5% to an all-time high after reporting pricing on its upcoming streaming service. Chevron (-4.9%) said it would buy Anadarko Petroleum (+32%) for $33 billion in cash and stock. The Dow Jones index rose by 269 points or 1.0%. The S&P500 index rose by 0.7% and is nearing record highs. And the Nasdaq index rose by 37 points or 0.5%. Over the week the Dow fell 0.1% with the S&P 500 up 0.5% and the Nasdaq rose by 0.6%.

US treasuries were weaker on Friday (yields higher). Investor risk appetite grew with stocks and commodities favoured over safe haven government bonds. US 2-year yields rose by 4 points to 2.39% and US 10-year yields rose by 6 points to 2.56%. Over the week US 2-year yields rose by 6 points and US 10-year yields rose by 5 points.

Bonjour Europe

European share markets rose on Friday. Autos rose 2%, with banks up 1.9% and basic resources up 1.2%. The pan-European STOXX600 index rose by 0.2%. The German Dax rose by 0.5% and the UK FTSE was higher by 0.3%. And in London trade, shares of Rio Tinto rose by 1.2% while BHP rose by 0.6%. 

Hello World!

Major currencies were firmer against the US dollar in US and European trade compared with the Asia close. The Euro rose from near US$1.1280 to US$1.1325 and was near US$1.1300 in late US trade. The Aussie dollar rose from near US71.20 cents to near US71.90 cents and was near US71.70 cents in late US trade. And the Japanese yen eased from 111.75 yen per US dollar to near JPY112.10 and was around JPY112.00 in late US trade.

Global oil prices rose on Friday. Investors were encouraged by better-than-expected Chinese export data. And investors believe that sanctions on Venezuela and Iran and conflict in Libya will continue to restrict global oil supplies. But the number of US oil rigs in operation rose by 2 last week to 833, potentially leading to higher supplies in the future. Brent crude rose by US72 cents or 1.0% to US$71.55 a barrel and US Nymex rose by US31 cents or 0.5% to US$63.89 a barrel. Over the week Brent rose 1.7% and Nymex rose by 1.3%.

Base metal prices were higher by up to 3.1% with zinc doing the best. But aluminium rose just 0.2% and lead fell 0.1%. Over the week metals fell by between 0.4-2.9% with nickel down the least and lead down the most. But copper rose by 1.2% with zinc up 1.7%.

The gold futures price rose by US$1.90 an ounce or 0.1% to $1,295.20 an ounce. The spot gold price was near US$1,290 an ounce in late US trade. Over the week gold fell by US40 cents. Iron ore rose by US80 cents or 0.8% to US$95.80 a tonne. Over the week iron ore rose by US$3.00 or 3.2%.

G’day Australia

In Australia no major data is scheduled. In the US, the Empire State index is expected with capital flows data.

 

Australia: Reserve Bank and jobs data ahead of Easter holidays

Friday, April 12, 2019

On Tuesday

The week kicks off on Tuesday when the weekly consumer sentiment index is issued from ANZ and Roy Morgan. The survey will be closely monitored in the lead up to the Federal election in May. Also, the Reserve Bank will release minutes of the April 2 monetary policy meeting. Furthermore, the Board changed the last sentence of their April Statement for the first time since Governor Philip Lowe was appointed in September 2016, giving members greater flexibility to support slowing domestic demand. The Statement said, “The Board will continue to monitor developments and set monetary policy to support sustainable growth in the economy and achieve the inflation target over time”.

On Thursday

The March employment report is released. Leading indicators of jobs growth have been mixed. That said, on average, 23,700 job have been added on a monthly basis over the 12 months to February. The national unemployment rate fell to 4.9%, a rate that hasn’t been bettered in a decade. CBA group economists’ forecast 20,000 jobs to be added, but the unemployment rate is expected to edge up to 5% with the participation rate at 65.6%. Also, on Thursday, the Commonwealth Bank issues the Business Sales Indicator for March.

Overseas: China economic growth data in focus

The much-anticipated Chinese economic growth and monthly activity data are released on Wednesday. In the US, consumer and manufacturing surveys, together with retail and international trade data are of most interest. 

On Monday

The week begins on Monday in the US when the New York Empire State Manufacturing Index is issued with capital flows data. In China, money supply and lending data are scheduled.

On Tuesday

The regular US weekly data on chain store sales is scheduled along with the monthly readings on industrial production and homebuilding sentiment. Factory output is tipped to lift by 0.3% in March. The National Association of Home Builders’ index is tipped to lift by 1 point to 63 points in April.  

On Wednesday

Attention turns to China when the March quarter economic (GDP) growth data is released. The annual growth rate is expected to decelerate to 6.3%, down from 6.4% in the December quarter. Also, on Wednesday, in the US, the Federal Reserve's Beige Book is released. In the March report, 10 of 12 districts reported growing economic activity, while the remaining two saw flat growth. At the same time, the Beige Book reported that “Labour markets remained tight for all skill levels, including notable worker shortages for positions relating to information technology, manufacturing, trucking, restaurants, and construction”. Wednesday also saw the US international trade balance is reported. The US trade deficit in goods and services fell to US$51.1 billion in January, down US$8.8 billion compared to December due to a 14% drop in imports from China ahead of potential tariff increases on March 1 (which didn’t materialise).

On Thursday

Figures for retail sales, the leading index and the usual weekly data on claims for unemployment insurance are all issued. The influential Philadelphia Federal Reserve manufacturing index is also released. Retail sales are tipped to rebound by 0.8% in March after cold winter weather and the US government shutdown constrained consumer spending in February. 

On Friday

Leading US housing market indicators, such as housing starts and building permits data, are expected to rebound in March, supported by falling mortgage rates and a still-solid jobs market.

Financial Markets

The US earnings (profit-reporting) season moves up a gear in the coming week. Companies expected to report earnings, include:

On Monday

Citigroup & Goldman Sachs.

On Tuesday

Bank of America, BlackRock, Charles Schwab, IBM, Johnson & Johnson, Netflix and UnitedHealth Group.

On Wednesday

Alcoa, Bank of New York Mellon, Morgan Stanley and PepsiCo.

On Thursday

American Express, Schlumberger and Travelers.

 

Good Morning, Australia

Monday, April 08, 2019

How’dy USA

In US economic data, non-farm payrolls (employment) rose by 196,000 in March (forecasts +180,000). The jobless rate was unchanged at 3.8% as expected. Average hourly earnings rose by 0.1% (forecast +0.3%) and annual wage growth fell from 3.4% to 3.2%. Consumer credit rose by US$15.19 billion in February (forecast +US$17 billion).

US share markets were firmer on Friday. Firm jobs data eased fears of an economic slowdown. Oil stocks rose as oil prices lifted. US-China trade talks will continue in the coming week by video-link. A number of US banks will release earnings figures in the coming week. The Dow Jones index rose by 40 points or 0.2%. The S&P500 index rose for the seventh straight day, up by 0.5%. And the Nasdaq index rose by 47 points or 0.6%. Over the week the Dow rose 1.9% with the S&P 500 up 2.1% and the Nasdaq rose by 2.7%. 

US treasuries were mixed on Friday. While job growth remained solid, wage growth eased in April. US 2-year yields rose by 1 point to 2.34% and US 10-year yields fell by 1 point to 2.50%. Over the week US 2-year yields rose by 8 points and US 10-year yields rose by 9 points.

Bonjour Europe

European share markets rose on Friday. Firm US jobs data provided encouragement to investors together with a 0.7% lift in German industrial output in February. Oil & gas stocks rose but banks and telecom fell. The pan-European STOXX600 index rose by 0.1%. The German Dax rose by 0.2% and the UK FTSE was higher by 0.6%. And in London trade, shares of Rio Tinto rose by 1.7% while BHP rose by 1.6%.

Hello World!

Major currencies were generally softer against the US dollar in US and European trade compared with the Asia close. The Euro fell from near US$1.1240 to US$1.1210 and was near US$1.1220 in late US trade. The Aussie dollar fell from near US71.30 cents to near US70.90 cents and was near US71.10 cents in late US trade. And the Japanese yen held between 111.60 yen per US dollar and JPY111.80 and was near JPY111.73 in late US trade.

Global oil prices rose on Friday to 5-month highs. Stronger-than expected US job figures eased demand concerns. The prospect of military action in Libya could also crimp crude supplies in the short term. But the number of US oil rigs in operation rose by 15 last week to 831. Brent crude rose by US94 cents or 1.4% to US$70.34 a barrel and US Nymex rose by US98 cents or 1.6% to US$63.08 a barrel. Over the week Brent rose 2.9% and Nymex rose by 4.9%.

Base metal prices were lower by up to 0.7% with nickel and tin down the most. But zinc bucked the trend, up 0.4%. Over the week metals fell by between 0.6-1.8% with zinc down the least and lead down the most. But nickel rose by 0.7%.

The gold futures price rose by US$1.30 an ounce or 0.1% to $1,295.60 an ounce. The spot gold price was near US$1,291 an ounce in late US trade. Over the week gold fell by US$2.90 or 0.2%. Iron ore fell by US10 cents or 0.1% to US$92.80 a tonne. Over the week iron ore rose by US$5.75 or 6.6%.

G’day Australia

In Australia no major data is scheduled. In the US, data on factory orders is expected.

 

Australia: Reserve Bank and consumer confidence in focus

Friday, April 05, 2019

On Tuesday

The week kicks off on Tuesday when the weekly consumer sentiment index is issued from ANZ and Roy Morgan. This survey will provide the first indication on how the Federal Budget went down with Aussie consumers. Also, on Tuesday, the Australian Bureau of Statistics releases the February data from its publication: “Lending to households and businesses”. In January, the value of lending to households fell by 2.4% after a 3.6% decline in December. Lending for housing fell by 2.1%, investor lending was down 4.1% and lending for owner-occupier dwellings fell by 1.3%.

On Wednesday

There is another check on consumer confidence, this time from the monthly survey by Westpac and Melbourne Institute. In March, consumer sentiment index fell by 4.8% to 98.8 after rising by 4.3% to 103.8 points in February. The sentiment index is below its long-term average of 101.3. Also, on Wednesday, the ABS release two building publications – “Building Activity and “Construction Activity” – both for the December quarter. Most interest will be in the component data on dwelling starts. There are a few speeches from Reserve Bank officials on Wednesday. Deputy Governor, Guy Debelle, speaks at the American Chamber of Commerce event in Adelaide. Melissa Hope, Head of Note Issue Department, and Lindsay Boulton, Assistant Governor (Business Services), speak at a currency conference in Dubai.

On Thursday

The ABS releases “Overseas Arrivals and Departures” containing data on tourism and migration flows. This Thursday also saw, Deputy Governor, Guy Debelle, delivers a speech via video conference to an audience in Hong Kong.

On Friday

The Reserve Bank releases the February data on credit and debit cards. Furthermore, on Friday the Reserve Bank releases the semi-annual Financial Stability Review.

Overseas: US inflation data and Federal Reserve in focus

A raft of reports on inflation are released in the US over the coming week. In addition, the minutes of the last Federal Reserve meeting are released. In China inflation and trade data are of most interest

On Monday

The week begins on Monday in the US when data on factory orders and consumer inflation expectations are expected. Orders may have fallen 0.3% in February after two gains of 0.1%.

On Tuesday

in the US, the National Federation of Independent Business (NFIB) releases its business optimism index for March together with the IBD/TIPP economic optimism gauge, JOLTS job openings and the regular weekly data on chain store sales.

On Wednesday

In the US, the consumer price index is due for release alongside the monthly Budget Statement, weekly mortgage finance data and the minutes of the last Federal Reserve policymaking meeting – the Open Market Committee. 

On Thursday

In the US, another gauge of inflation – the producer price index (PPI) – or measure of business inflation, is released. The annual core PPI is expected to ease from 2.5% to 2.4%. Also, on Thursday the usual weekly data on claims for unemployment insurance is issued. In China, the key data is released over Thursday and Friday. On Thursday data on consumer and producer prices is released together with vehicle sales.

On Friday

There yet two more inflation measures are to be released – data on export and import prices. The University of Michigan releases its preliminary estimate of consumer sentiment for April. On Friday in China, export and import figures for March are issued. At present forecasts suggested a widening of the trade surplus from US$4.1 billion to US$26.4 billion.

 

Good Morning, Australia

Monday, April 01, 2019

How’dy USA

In US economic data, personal income rose by 0.2% in January (forecast +0.3%) with spending up 0.1% (forecast +0.3%). The Federal Reserve's preferred measure of inflation - the core personal consumption deflator - rose 0.1% in January to be up 1.8% on the year (forecast 1.9%). New home sales rose 4.9% in February to 667,000 (620,000). Consumer sentiment rose from 93.8 to 98.4 in March (forecast 97.8).

US share markets posted solid gains on Friday. There were encouraging reports of progress on the China trade deal and inflation data was benign. The Dow Jones index rose by 211 points or 0.8%. The S&P500 index rose by 0.7%. And the Nasdaq index rose by 60 points or 0.8%. Over the week key indexes rose 1.1- 1.7%. Over the quarter the Dow rose 11.15% with the S&P 500 up 13.1% and Nasdaq up 16.5%.

Bonjour Europe

European share markets were firmer on Friday despite the latest Brexit deal. But there were encouraging signals on US-China trade talks. The pan-European STOXX600 index rose by 0.6%. The benchmark index posted its best quarterly gain in four years. The German Dax rose 0.9% on Friday and the UK FTSE was higher by 0.6%. And in London trade, shares of Rio Tinto rose 1.8% while BHP rose by 1.7%.

The UK Parliament rejected the Prime Minister's Brexit Withdrawal Agreement by 344 votes to 286.

Hello World!

Major currencies were mixed against the US dollar in US and European trade compared with the Asia close. The Euro held between US$1.1207 and US$1.1243 and was near US$1.1225 in late US trade. The Aussie dollar held between US70.74 cents and US71.03 cents and was near US70.95 cents in late US trade. And the Japanese yen held between 110.56 yen per US dollar and JPY110.93 and was near JPY110.84 in late US trade.

Global oil prices were higher on Tuesday. The number of oil rigs in operation in the US fell by 8 to 816 - the lowest in almost a year. Brent crude rose by US57 cents or 0.8% to US$68.39 a barrel and the US Nymex price rose by US84 cents or 1.4% to US$59.94 a barrel. Over the week Brent rose 2% and Nymex rose 1.9%. Prices rose 30% in the March quarter - the biggest gain in a decade.

Base metal prices were generally higher on Friday. Zinc rose by 2.4% and copper rose 2%. But lead and tin lost 0.1%. Over the week zinc rose 5.4% with copper up 2.7% but lead, nickel and tin fell by less than 0.4%.

The gold futures price fell by US$3.20 an ounce or 0.2% to $1,298.50 an ounce. The spot gold price was near US$1,292 an ounce in late US trade. Over the week gold fell by US$13.80 or 1.1%. Iron ore rose by US$3.20 or 3.8% to US$87.05 a tonne. Over the week iron ore rose by US25 cents or 0.3%.

G’day Australia

In Australia, the NAB business survey, manufacturing surveys and CoreLogic home prices are released. In the US, retail sales, business inventories and construction spending data are released with the ISM manufacturing survey.

 

Job market in good shape

Friday, March 29, 2019

A record number of people are in work. Job vacancies are also at record highs. A near record proportion

of Aussies are in the workforce. And the jobless rate is at decade lows. So clearly the job market is in good shape. A solid jobs market means that the Reserve Bank is more likely to remain on the interest rate sidelines. There doesn’t appear a near term risk of people losing jobs in a significant way, in turn prompting lower spending, lower business revenues and lower business profit

In the December quarter, there was the rare event with both home prices and share prices falling. As a result, wealth levels fell. But that is in the past. The March quarter will end in a few days and the share market, so far, is sitting on tidy gains of around 8%. But a rise in the value of share market assets will be partially offset by lower home prices – principally in Sydney and Melbourne,

What do the figures show? 

Employment rose by 68,000 in the three months to February after a gain of 54,800 in the previous three months. Over the past 12 months, 283,600 people have found jobs, down from 285,100 in the 12 months to November. A record 12.76 million Aussies are employed.

Over the year to February, 10 out of 19 sectors added jobs. The strongest gains were in Professional, Scientific and Technical Services (up 40,900), Other Services (up 32,700) and Public Administration and Safety (up 17,100).

In the three months to February, the number of jobs fell by the most in Manufacturing (down 57,700), Wholesale trade (down 21,500) and Construction (down 18,200).

Over the year to February, 11 out of 19 sectors added jobs. The strongest gains were in Public Administration & Safety (up 164,200), Professional, Scientific & Technical Services (up 104,800) and Wholesale Trade (up 43,100). The sectors that shed the most jobs over the past year were Manufacturing (down 62,500), Construction (down 49,300) and Retail Trade (down 24,700).

Health Care and Social Assistance remains the biggest employer with 1.7 million employees (13.3% of the total) followed by Retail Trade (1.28 million jobs or 10%), Construction (1.15 million or 9%) and Professional, Scientific & Technical Services (1.138 million or 8.5%).

What about job vacancies?

Job vacancies rose by 1.4% to a record 245,300 in the three months to February. Vacancies are up  by 9.9% on a year ago. In original terms, annual changes in vacancies across states and territories were: NSW (up 11.3%); Victoria (up 9.3%); Queensland (up 1.1%); South Australia (down 9.7%); Western Australia (up 32%); Tasmania (up 3.4%); Northern Territory (unchanged) and ACT (up 11.9%). Vacancies rose in 13 of the 18 industries over the past year. Vacancies rose the most in Construction (up 33.1%) from Healthcare & Social Assistance (up 23%). Vacancies fell 22.9% in Information, Media & Telecommunications. By sector, private sector job vacancies rose by 1.8% over the three months to February and by 10.1 over the year. Vacancies in the public sector fell by 1.7% but were up by 7.7% from a year ago.

Financial accounts

The ABS noted:Household wealth (net worth) decreased 2.1% in the December quarter 2018, driven by real holding losses on land and dwellings, and financial assets. The fall in household wealth is the largest since the September quarter 2011 (in percentage terms), and follows a 0.1% (revised) decrease in the previous quarter. Household wealth per capita decreased $10,198 to $404,320, following a $2,263 fall in household wealth in the previous quarter. This is the first consecutive decrease in household wealth per capita since the December quarter 2011.”

Households held a record $1,150.1 billion in cash and deposits at the end of December. Cash and deposit holdings represented 22% of financial assets, up from 21.4% in the June quarter, but below the 21.9% average since the global financial crisis and long-run average of 21.7%.

Households held $989.8 billion in shares or 18.9% of all financial assets in the December quarter, up from 18.7% in the September quarter, in-line with the average since the global financial crisis, but below the long-run average of 22.4%. 

Pension fund (superannuation fund) assets fell by $89.8 billion from record highs to $2,203 billion in the December quarter. Cash and deposits stood at 11% of financial assets, below the 13.1% average since the global financial crisis, but above the long-term average of 9.4%.

Foreigners held $548.5 billion of Aussie listed shares in the December quarter, down from a record $613.4 billion in the September quarter. Foreigners held 30.9% of total listed shares, below the 31.5% average since the global financial crisis and long-term average of 32.8%.

Why is the data important?

The Australian Bureau of Statistics (ABS) provides detailed labour market figures one week after releasing ‘top level’ statistics of employment & unemployment levels across states and territories. The detailed data is useful in identifying broader underlying trends and instructive about the health of the economy.

The Australian Bureau of Statistics releases Job Vacancies data each quarter. The data is useful in gauging the strength of the job market.

The Australian Bureau of Statistics releases the Financial Accounts publication each quarter. The data covers assets, liabilities and financial flows for the key sectors of the economy. Figures on financial wealth help reveal the true state of household finances.

What are the implications?

The job market is very much in the Reserve Bank’s sights at present. The worry is that the globally-induced slowdown in activity could cause companies to trim staff. So far, that’s not the case. And that means there isn’t the necessity to trim the cash rate. If stimulus is required, tax cuts would be a better way of providing a boost. CommSec expects official interest rates to remain unchanged for the foreseeable future, but the leaning is toward lower interest rates.

 

Good Morning, Australia

Monday, March 25, 2019

How’dy USA

In US economic data on Friday, the Markit 'flash' manufacturing purchasing managers index fell from 53.0 to 52.5 (forecast 53.6). Existing home sales rose by 11.8% to a 5.51 million annual rate in February (forecast 5.1 million). The Federal Budget was in deficit by US$234 billion in February (forecast US$227bn). Wholesale inventories rose by 1.2% in January (forecast +0.2%).

US share markets fell on Friday on fears of a global slowdown. But President Trump said a trade deal with China "will probably happen". The Dow Jones index lost 460 points (or 1.8%). The S&P500 index fell 1.9%. And the Nasdaq index lost 196 points or 2.5%. Over the week, the Dow fell by 1.3%, the S&P 500 fell by 0.8% and the Nasdaq lost 0.6%.

The US treasuries rose on Friday (yields lower). The yield curve inverted (3-month bill yields above 10-year bond yields) for the first time in 12 years, in response to weak European data. US 2-year yields fell by 9 points to 2.32% and US 10-year yields fell by 10 points to 2.44%. Over the week, US 2-year yields fell by 12 points and US 10- year yields were down by 15 points.

In the US the Chicago Federal Reserve national activity index is released with the Dallas Fed manufacturing index.

Bonjour, Europe

European share markets fell on Friday in response to weak manufacturing and services data. The euro-zone composite purchasing managers index fell from 51.9 to 51.3 in March. The German composite PMI was at a 6-year low of 51.5. Banks and autos lost 2.2%. The pan-European STOXX600 index fell by 1.2%. The German Dax lost 1.6% and the UK FTSE was lower by 2.0%. In London trade, shares of Rio Tinto fell by 1.2% while BHP fell by 2.0%.

Hello, world!

The Euro and commodity currencies were weaker against the US dollar in US and European trade compared with the Asia close. The Euro fell from near US$1.1390 to around US$1.1270 and was near US$1.1310 in late US trade. The Aussie dollar fell from US71.15 cents to US70.75 cents and was near US70.85 cents in late US trade. But the Japanese yen rose from 110.83 yen per US dollar to JPY109.75 and was near JPY109.90 in late US trade.

Global oil prices fell on Friday with traders worried about the outlook for global crude demand. Traders reacted to weak manufacturing data in Germany and France. But supporting prices was data showing that the number of oil rigs in operation in the US fell to 12-month lows in the latest week. Brent crude fell by US83 cents or 1.2% to US$67.03 a barrel and the US Nymex price fell by US94 cents or 1.6% to US$59.04 a barrel. Over the week Brent fell by 0.2% but Nymex was up by 0.9%.

Base metal prices were generally lower on Friday. Copper lost 1.8% and zinc fell 0.8%. But aluminium and tin rose by around 0.25%. Over the week metals were mixed with copper down 2% and lead down 1.7% but other metals were higher with tin up 1.7%.

The gold futures price rose by US$5.00 an ounce or 0.4% to $1,312.30 an ounce on Friday. The spot gold price was near US$1,313 an ounce in late US trade. Over the week, gold rose by US$9.40 or 0.7%. Iron ore rose by US$2.70 or 3.2% on Friday to US$86.20 a tonne. Over the week, iron ore rose by US60 cents or 0.7%.

G’day, Australia

In Australia no major data is expected.

 

Quiet week with focus on ‘second tier’ data

Friday, March 22, 2019

On Tuesday

The week kicks off on Tuesday with a speech from Luci Ellis, Assistant Governor (Economic), at the Housing Industry Association March Industry Outlook breakfast. In the coming week economists will likely be doing early preparations for the Federal Budget. Because clearly there isn’t too much in the way of influential economic events. Also, on Tuesday, the regular weekly reading on consumer confidence is published by ANZ and Roy Morgan.

On Wednesday

The focus is on ‘panel participation’ by Christopher Kent, Assistant Governor (Financial Markets) at the FX Week Australia event in Sydney. Also, on Wednesday, the Australian Bureau of Statistics will release data on regional population growth for the 2017/18 year. The ABS also release December quarter figures on engineering construction. A boom in infrastructure spending is underway so the latest ABS data will put the spotlight on how much activity remains to be completed.

On Thursday

The ABS release detailed estimates on the job market for February. The data will include industry estimates of employment. Job vacancies data is also released – currently at record highs. On Thursday, the ABS release the ‘Finance and Wealth’ estimates for the December quarter. The figures include data on household wealth – likely to show a fall, but this is also likely to be partially reversed in the current quarter given the strong share market.

On Friday

The Reserve Bank releases the ‘Financial Aggregates’ publication, including the latest money supply and lending aggregates. The Australian Prudential Regulation Authority (APRA) also issues the February data on bank deposits and lending, including credit card data.

Overseas: US inflation & growth in focus

Key US economic growth and inflation measures are the key interest points in the coming week.

On Monday

The week begins on Monday in the US when the Chicago Federal Reserve national activity index is released with the Dallas Federal Reserve manufacturing index.

On Tuesday

The February figures on building permits and housing starts are released. The S&P/Case Shiller home price index is issued with the FHFA measure on home prices. The March reading of consumer confidence is also issued with the influential Richmond Federal Reserve manufacturing index. The usual weekly data on chain store sales is also scheduled. The S&P/Case Shiller measure of home prices stood 4.2% higher than a year ago in December – a four year low and down from the 4.6% annual gain in November. Housing starts posted a huge 18.6% lift in January, so the February data is likely to show some retrace

On Wednesday

The January international trade data is issued. In December the deficit widened from US$50.3 billion to US$59.8 billion. The trade deficit over 2018 was at a 10-year high. On Wednesday in the US, the broader December quarter current account data is released with the weekly measure of mortgage applications.

On Thursday

The final estimate of economic growth for the March quarter. The initial estimate was put at a 2.6% annual rate. But the thinking is that the growth estimate may be revised down considering the widening of the trade deficit revealed for December. The usual weekly data on claims for unemployment insurance is released with pending home sales and the Kansas Federal Reserve manufacturing index.

On Friday

Personal income & spending data will be released with the Chicago purchasing managers index, weekly consumer sentiment and new home sales. In China, the only real interest will be in the January/February data on industrial profits – due for release on Wednesday.

 

Good morning, Australia

Wednesday, March 20, 2019

Howd’y USA

In US economic data, factory orders rose by 0.1% (survey: +0.3%) in January. Ex-transportation orders fell by 0.2%. US share markets were mixed on Tuesday as the US Federal Reserve's two-day interest rate policy meeting kicked-off. The Dow Jones traded up by 195 points during the session, but fell back on Bloomberg reports that US officials are worried that China may be pushing back against US demands in the country’s  ongoing trade talks. But the Wall Street Journal reported that the US-China trade talks were in the final stages with US officials due to fly to Beijing next week. Monster Beverage shares fell by 4.4% after Wells Fargo raised concerns about competitive pressures from rival energy drink Bang. The Dow Jones index fell by 26 points or 0.1%. The S&P500 index fell by 0.01%. But the Nasdaq index rose by 9 points or 0.1%.

US treasuries fell (yields higher) on Tuesday, following German Bunds, as the US Federal Reserve's two-day interest rate policy setting meeting began. US 2-year yields rose by 2 point to 2.47% and US 10-year yields rose by 1 point to 2.62%. 

Major currencies were mixed against the US dollar in US and European trade compared with the Asia close. The Euro fell from highs of US$1.1361 to lows of US$1.1339 and was near US$1.1354 in late US trade. The Aussie dollar fell from highs of US71.06 cents to lows of US70.84 cents and was near US70.90 cents in late US trade. And the Japanese yen rose from 111.47 yen per US dollar to JPY111.25 and was near JPY111.38 in late US trade. 

Global oil prices were mixed on Tuesday as concerns over the US-China trade talks cast a shadow over the outlook for global growth and Chinese demand for crude oil. Brent crude rose by US7 cents or 0.1% to US$67.61 a barrel, but the US Nymex price fell by US6 cents or 0.1% to US$59.03 a barrel. 

The US Federal Reserve hands down its interest rate decision on Thursday at 5am AEDT.  

Bonjour, Europe

European share markets rose on Tuesday with the pan-European STOXX600 index up by 0.6%. The STOXX 600 autos and suppliers sector index jumped by 2.4%. Shares of Fiat Chrysler rose by 5.0% after Peugeot (+2.7%) suggested that it was among the options for a merger. Shares of miner Antofagasta (+2.8%) lifted after the company announced a higher-than-expected dividend payout. The German Dax rose by 1.1% and the UK FTSE was up by 0.3%. In London trade, shares of Rio Tinto (+0.9%) and BHP (+0.7%) both rose.  

Top of the morning, London

British Prime Minister Theresa May is expected to ask for a delay to Britain's planned departure from the EU  when she meets officials at the EU Summit in Brussels on Thursday.

Base metal prices mostly lifted on the London Metal Exchange on Tuesday. Aluminium (+1.2%), zinc (+1.2%) and nickel (+1.0%) advanced, but lead (-0.4%) fell. Aluminium reached a 3-month high after major producer Norsk Hydro was hit by a cyber attack, which disrupted its smelter operations.  

The gold futures price rose by US$5.00 an ounce or 0.4% to $1,306.50 an ounce on Tuesday. The spot gold price was near US$1,306 an ounce in late US trade. Iron ore fell by US85 cents or 1.0% to US$86.95 a tonne on Tuesday. 

G’day, Australia

In Australia, skilled internet job vacancies are issued. The RBA's Assistant Governor Michele Bullock speaks in Perth at 11am AEDT.

 

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