Equity investors buoyed by strong economic data

Blog
Friday 9th April 2021

Equity investors buoyed by strong economic data

Blog
Friday 9th April 2021
Written by Chris Lioutas

Markets:

  • Equity markets in Australia, USA, and Europe finished higher for the week supported by improving economic growth data, whilst Asian markets struggled for direction.
  • In local stock news, the banking regulator has found that Macquarie Bank did not properly manage risk or meet liquidity reporting standards. APRA has increased the bank’s liquidity and operational risk requirements in response. Macquarie said the breaches were historical and did not affect capital or liquidity positions.
  • Cleanaway Waste Management’s shares surged after the company said it would acquire the local recycling busines of French firm Suez for $2.52 billion.
  • Oil prices fell as the world’s oil producers decided to defy Saudi Arabia and push for higher output over the next 3 months. The 23-member OPEC+ said it will pump an additional 350,000 barrels per day in May and June, and a further 400,000 in July.

Economics:

  • The Reserve Bank of Australia has left interest rates on hold at 0.1% at its April meeting, reconfirming it remains committed to its current policy settings. The board is closely watching the full impact of JobKeeper ending and trends in housing borrowing but remained concerned that unemployment is still too high.
  • Sydney house prices surged 3.7% in March, the fastest monthly rise in 33 years, as buyers raced to take advantage of low interest rates and government incentives, whilst also being spurred by high household savings rates and inability to spend offshore. The national average rose 2.8% in March. House prices rose 3.1% whilst apartment prices rose 1.9%. The national index bottomed out last September, falling 2.1%.
  • Australian job vacancies rose by almost 14% (35,000) over the three months to the end of February. Vacancies have swelled in recent quarters to 288,000 and are up 61,000 on the same period last year. Vacancies rose in the private sector by 14% and 11% in the public sector. Private sector vacancies have done the heavy lifting since the pandemic started.
  • Housing related lending remained strong in February, but the total amount of lending eased slightly from its January record high, where lending surged by 10.5%. The composition of lending suggests that investors are becoming more active in the housing market. In February, the strongest lending growth occurred in Victoria and SA, whilst NSW and QLD posted falls.
  • The Australian trade surplus was $7.5 billion in February 2021, whilst the prior month was revised lower to a still strong $9.6 billion. Exports fell by 1.3% after several strong months of gains. Imports rose by a large 5.2% after 2 months of falls. Imports were driven by car imports and consumer goods. The export fall was driven by iron ore, even though prices were higher, whilst rural goods exports were strong.
  • US data showed that the number of Americans filing new claims for unemployment benefits rose unexpectedly last week. Other data showed US manufacturing activity soared to its strongest level in more than 37 years in March, with employment at factories the highest since February 2018.
  • US job openings rose in February to a 2-year high while hiring picked up. The data comes after recently released strong payrolls report and another report showing activity in the service sector climbed to a record high in March.
  • Data showed German industrial orders rose for the second month in a row in February, driven by strong domestic demand.
  • The International Monetary Fund raised its global growth forecast to 6% this year from 5.5%, a rate not seen since the 1970s. The Fund upgraded Australia’s economic growth outlook to 4.5% this year from the 3.5% forecast in January 2021 and the 3% forecast in October 2020.

Politics:

  • Global covid infections rose in March resulting in a continuation of lockdowns in some parts of the world, particularly Europe, with some countries increasing restrictions. On the vaccine front, 35 US states will have expanded vaccine eligibility to everyone 16 years and older, with Pfizer and Moderna each on track to deliver enough shots to vaccinate 100 million people by the end of May, whilst Europe struggles for supply which has been made worse by some countries pausing the use of the AstraZeneca vaccine.
  • Closer to home, PM Scott Morrison announced that the government had changed its guidance on the AstraZeneca vaccine, saying it is not suitable for those aged 50 years and younger, a day after saying that there were no plans to change the rollout of the same vaccine. The move comes after side effects focused on blood clots became too prevalent globally to continue use on those aged under 50, where the Pfizer vaccine has become the preferred candidate. The move puts Australia’s vaccine rollout plans under pressure given previous supply shortages and inability to produce the Pfizer vaccine locally. 
  • US President Biden’s infrastructure plans will likely need a significant overhaul as two Democrat senators are already voicing concerns regarding the significant rise in the corporate tax rate to fund the plan and broader concerns regarding some of the details. Senate Republicans have already committed to voting down the plan.
  • Iran and the US have taken part in negotiations with the EU, Russia, and China aimed at finding a path to reviving the 2015 nuclear deal

Author 

Chris Lioutas, Director, Insight Investment Consultants

Chris holds the position of asset consultant for Maxim Advisors and is a current sitting member of Maxim's investment committee. 

With permission of the author, this article is presented by Maxim Private Clients Pty Ltd ASFL No. 511972

Maxim Private Clients Pty Ltd ABN 47 611 614 398 AFSL No. 511972

Disclaimer: This material has been prepared without considering any potential investor's or clients objectives, financial situation or needs. This article is of a general nature and does not consider the individual circumstances of its recipients. Any information contained within this publication should not be misinterpreted as advice in any way. Please consult your financial advisor should you have any questions or concerns.