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Bond prices higher on economic softness

Markets

  • The local equity market pushed higher this week whilst global markets were mixed

  • US government bond yields fell (prices rose) as US economic data came in weaker than expected and on reports of another US bank in trouble. 

  • Concerns regarding US banks rose again after commercial real estate lender New York Community Bancorp’s share plunged and went into a trading halt with the company announcing issues with how it tracks loan risks and replaced its leadership. 

  • In local stock news, Life360 shares surged as the company strongly beat expectations and provided strong forward guidance. Earnings was 45% ahead of consensus with hardware the main driver whilst operating costs fell sharply driving better margins.

  • Magellan Financial Group shares rose strongly after the fund manager reported fund outflows slowed to $200 million in February and funds under management increased from $36.3 billion to $37.2 billion. 

  • GQG Partners saw US$1.1 billion of inflows in February while performance in their underlying funds added a further US$9.5 billion, growing funds under management to US$137.5 billion. 

  • The Australian dollar strengthened against the US dollar, supported by announced Chinese infrastructure spending and a slightly more positive mood on US rate cuts.


Economic

  • The Australian economy grew by just 0.2% in the December quarter with an annual rate of 1.4%. This is well below population growth, extending Australia’s per capita recession. The household savings rate increased to 3.2% but still sits comfortably below its pre-covid averages. 

  • The Australian current account surplus widened to $11.8bn in the December quarter whilst the trade surplus rose to $32.4bn and the terms of trade rose by 2.2%. 

  • Australian company profits rose by 3.8% in the December quarter led by the mining sector. Wages and salaries growth eased to 0.9% in the period, with 8% growth over the year. 

  • Australian building approvals fell by 1% in January, with private detached approvals down almost 10%. In contrast, private multi-unit approvals rose 19.5%. Seasonality likely driving both results. 

  • US Federal Reserve chair said the central bank expects to reduce interest rates later this year. Jerome Powell said inflation had eased substantially but that policymakers still needed greater confidence in the continued decline before cutting rates. 

  • US private payroll data showed a 140,000 increase in February, coming in below expectations. JOLTS job openings fell from 8.89 million to 8.86 million in January. 

  • A range of US data pointed to a softer economic outlook with a key manufacturing index falling in February along with a key consumer sentiment index. Construction spending in January also fell whilst factory orders fell by 3.6% in January. 

  • Eurozone flash CPI came in higher than expectations but lower than previous readings

  • The Japanese government is discussing officially stating that the country’s economy has overcome deflation

  • The Chinese government announced an ambitious 5% economic growth target for 2024, with Premier Li Qiang intimating more policy support and all hands-on deck. Based on the current state of the economy more stimulus will be needed. 

Politics

  • Chinese Premier Li Qiang will not hold a press briefing at the country’s National People Congress. This is the first time a sitting premier hasn’t held this address since 1993. 

  • The US Supreme Court voted 9-0 to have Donald Trump appear on presidential ballots this year, putting a clear and decisive end to efforts nationwide to ban him from holding office. 

  • Presidential contender Nikki Haley has pulled out of the Republican primary as it became very clear Donald Trump would easily win the primary nomination to go head-to-head with President Joe Biden again


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