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St George Economics economy and finance update

Share Markets:

Sentiment in equity markets continued to be boosted by expectations that the US economy was improving. There was also some positive news from Europe.

Greece was granted a €6.8bn deal to be paid in instalments on the condition it will continue cutting public sector jobs and selling state-owned assets.

The Euro-Stoxx rose 2.1%. Meanwhile in the US, the S&P500 rose 0.5% the Dow lifted 0.6% and the Nasdaq rose 0.2%.

Bonds:

US treasuries rose (yields fell) suggesting that bonds may have been oversold.

The growing possibility that the Fed could scale back asset purchases has been negative for bonds and sent 10-year yields to their highest since 2011. However, below trend growth and low official interest rates still points to low yields by historical comparison. 

Foreign Exchange:

The US dollar fell against most currencies, with the US dollar index retreating from a three-year high. The euro was supported by the bailout deal for Greece.

Improved risk appetite and a weaker US dollar were positive for the AUD, which rose to around 91.4US cents.

Commodities: 

Most commodity prices strengthened, moving inversely with the US dollar, although oil prices fell on easing supply concerns.

Libya and Iraq announced they would resume operations. Gold prices benefited from the dip in the US dollar.

Australia:

ANZ job ads fell 1.8% in June, after falling a downwardly revised 2.5% in May.

This was the fourth consecutive monthly decline in job ads suggesting the outlook for employment growth is subdued.

For the year to June, job ads are down 18.7%, slightly below the -18.6% rate of decline in the year to May.

Europe:

Eurozone Sentix investor confidence slipped from -11.6 to -12.6 in the July survey.

Expectations were steady with the decline driven entirely by renewed deterioration in the current situation index.

The concerns about the political situation in Portugal are likely outweighing the European Central Bank's (ECB) easing bias. 

German industrial production fell 1.0% in May, the first fall since January, led by consumer durables and capital goods along with a further decline in energy. Construction pulled back a little after April's jump in activity.

In other data, exports fell 2.4% in May, more than reversing all of this year's modest rise up until April. Overall data from Germany is suggesting that growth remains subdued and not enough to offset mild to deep recession across much of the rest of Europe.

Japan:

The current account surplus narrowed more than expected to ¥540.7bn in May, from a surplus of ¥750.0bn in April.

This is a 58% increase in the surplus in the year to May, with increased exports and income from overseas investments driving the improvement, indicating the depreciation of the Yen has benefited Japan.

United States: 

Consumer credit lifted US$19.6bn in May following a revised US$10.9bn rise in the previous month.

Consumers appear to be more confident in taking on a bit more debt reflecting the recovery in housing and rising stock prices.

Please read the disclaimer below:

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.

Topics:  economy equity markets finance st george update


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