Employment data held much of the domestic focus last week. From a monetary policy perspective, unemployment (along with inflation) are the focus for the RBA – although housing is also gaining in importance. While the saga surrounding the volatility in the employment data gained attention last week given the data’s importance, it is unlikely to have had a bearing on the RBA’s internal policy thinking as the RBA does not expect a meaningful improvement in the unemployment rate for some time yet.
Offshore, concerns about the global growth outlook led to some clear risk aversion and was the key driver of market direction last week. Equities fell sharply and government bonds rallied after weaker-than-expected German data gave further credence to the arguments that saw IMF downgrade its global economic growth forecasts.
Reassurance from the US Federal Reserve that rates would remain “near zero” for some time late in the week managed to give US markets a boost which recouped some of the earlier losses, but this was short-lived as Europe remains weak with growth concerns remaining centre stage there. Our market followed the offshore lead and also had a roller coaster ride last week, closing near its lows last Friday.
Rate hikes seem to off the agenda at the moment with central banks around the world quite rightly pointing out that if global growth slows, monetary policy will remain easier for longer. But will a promise of rates “low for longer” be enough to calm financial markets at the moment?
That said, our share market is set to get off to a weaker start today following further falls in US & European markets over the weekend.