Key Data for the Week
Key economic data released this week:
The Australian sharemarket fell 0.3% yesterday, with the Health Care sector the weakest performer. CSL fell 1.5%, Cochlear lost 1.3% and ResMed slipped 0.7%.
The Financials sector weakened alongside the big four banks; ANZ fell 0.4%, Westpac lost 0.3%, Commonwealth Bank slipped 0.1% and NAB closed flat.
Telecommunications stocks were also a drag on the market; Telstra slipped 1.1% and TPG fell 1.3%.
The Materials sector outperformed the market, while mining stocks were mixed; BHP lost 0.3%, while Rio Tinto rose 0.3%, Fortescue Metals added 2.0% and Newcrest Mining gained 2.5%.
The Australian futures market points to a 0.29% rise today, being driven by stronger overseas markets.
European sharemarkets rose on Wednesday. Investors were encouraged by an easing of tensions in Hong Kong and positive Chinese economic data. The broad based STOXX Europe 600 rose 0.9% and the Italian FTSE MIB gained 1.6%, after the Prime Minister unveiled a new cabinet.
US sharemarkets also finished higher overnight, responding positively to news in Hong Kong, Italy and the UK. The Information Technology sector was the strongest performer; Alphabet and Microsoft gained 1.1% and 1.2% respectively, Apple added 1.7% and Facebook rose 2.6%. By the close of trade, the Dow Jones rose 0.9%, the S&P 500 added 1.1% and the NASDAQ lifted 1.3%.
Behind the headline of Australia’s weakening GDP were other details of the economy that are sometimes overlooked.
The annual GDP growth rate of 1.4% is the slowest in 10 years, and way below the RBA’s target growth rate of 2.75%, where they see no excess capacity in the economy. We are therefore performing well under our potential.
The household savings rate and private demand are also poor numbers.
The household savings ratio fell to an 11 ½ year low of 2.3%, which suggests there is limited room for households to spend at a pace beyond the growth in their incomes.
It’s little wonder the demand within the economy is also soft.
Domestic private demand, which excludes trade, grew at its weakest annual pace in 4 ½ years and private demand, which excludes government, was at its softest rate in over a decade.
Weakness in consumer spending and the housing sector have resulted in the economy losing speed since the second half of last year.
The RBA will be hoping recent interest rate cuts and tax rebates spark some life back into the economy, and this data suggests further rate cuts are on the table.
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