Financial markets were more stable during the week. While Australian equity markets were marginally lower on the back of continued weakness in the energy (-1.8%) and materials (-0.8%) sectors, led by the decline in WTI crude oil (-5.0%), gold (-1.4%), silver (-1.95%) and copper (-2.7%), global markets were generally flat to positive, while the interest rate sectors in REITs and infrastructure were supported by lower global bond yields.
As markets continue to recalibrate to higher for longer cash rates, the latest US payroll data (act +175k v’s f’cst +240k) highlighted the economic activity continues to remain robust, but that labour markets are likely to have passed their peak. While the payroll figure was the lowest number in the previous six months, it continues to remain above the 142k average since 2018 and does not alter our view that the Fed will remain cautious on the timing of any rate cuts through the 2h24.
In Australia, the weaker than f’cst retail sales figures (act -0.4% v’s f’cst +0.2%) along with weaker than f’cst private credit figures (+0.3%) continue to point to a slowing domestic economy. With the RBA meeting this week (6th) we expect no change to the current monetary policy setting (4.35%) despite the fact that Australia house prices continue to move higher along with rental values, which hit a record high in April. In addition, the release of the NAB Business Confidence surveys will provide further insight into the direction of business investment and labour market strength in near term, and along with the (CBA) household spending data, a backdrop to consumer behaviour through the 2q24.
In China, the improving Manufacturing PMI data (51.4) continues to reflect that the deflationary pressures that have impacted the Chinese economy may now be subsiding. While this is a positive for the domestic growth outlook in China as the level of excess capacity subsides, it may also see the downward move in the prices of global (tradeable) goods coming to an end. In Europe, retail sales (f’cst +0.7% m/m, -0.2% y/y) along with the BoE meeting (5.25% no change) will be the main items for markets to ponder, while in the US the jobless claims (f’cst 1785k) and Michigan University Sentiment surveys (May) will provide another gauge on the strength of US labour markets and consumer behaviour.
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