“Under Pressure” – A title not only fitting to what has transpired in financial markets over the last two weeks, but also serves as a tribute to the passing of David Bowie, a music legend. Freddie Mercury and Queen wrote the original version of this song, but were not satisfied. During an impromptu jam session back in 1981, David Bowie added his magic to the tunes and lyrics and a hit was born. In this week’s commentary I’ve added a snippet about Bowie’s visionary innovation in the financial markets back in 1997 which some of you may find interesting.
Back to markets and equities, currencies and commodities came “under pressure” again last week, with the price of oil trading below $30 per barrel – a 12-year low. The risk aversion has seen investors move into the safe haven of government bonds and the US dollar sending all other markets lower. The US and European equity markets are now down 9% and 10% respectively since the start of the year while the Chinese market is down 18% over this period. Our share market closed the week at its lowest level in two-and-a-half years, down 7.6% since 1 January.
Current futures market pricing still has just over a 50% probability of a 25 basis point RBA rate cut factored in by May (only 10% for February). This seems to be a reasonably accurate reflection of the RBA’s retention of an easing bias offset by the current offshore volatility and risk aversion.
The Australian dollar plunged to USD0.6827 during last Saturday morning’s trading session, the currency’s lowest mark since April 2009 when markets were still struggling to recover from the GFC and the shock of Lehman Brothers’ 2008 collapse. The heavy losses came as Wall Street stocks tumbled over 2% on Friday night, extending the worst start to a year for equity markets in history.
Rural Bank Scholarship Program – applications closing soon
Applications for the Rural Bank Scholarship Program close on Monday 25 February. The Program aims to support first-time undergraduate university students with a passion for agriculture to commence their studies and start them on their way towards a career in support of the Australian agriculture sector. Visit www.ruralbank.com.au/scholarships for more information and to apply online.