Global markets
U.S. stocks sagged last week – absent any clear trigger – reflecting general concerns with a combination of weakening growth due to delta, but also persistent pricing pressures due to lingering supply bottlenecks, or what some are already over-excitedly suggesting is a return to ‘stagflation’.
To be sure, the Fed’s Beige Book review on the economy did note a modest downshift in activity during August with fewer people travelling and eating out as delta cases mount.

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Global markets
It was a relatively muted week on global markets following the flurry of excitement around the Fed’s taper intentions over the previous week. All up, the story remains that equities continue to grind higher, helped by still solid growth in earnings and broadly steady interest rates. The major highlight again came on Friday with a much weaker than expected U.S.

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Global markets
Global equities bounced back last week reflecting a relatively dovish speech by Fed chair Powell at Jackson Hole on Friday. The key takeaway from the speech was that the condition of “substantial further progress” towards maximum employment has not quite been achieved, meaning the Fed might still hold off on making its tapering announcement as early as the September 21-22 meeting.

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Next week’s June quarter GDP result will be the first test of whether Australia can avoid a double dip technical recession this year.  Due to lockdowns in New South Wales and Victoria, it is already clear that Q3 (September quarter) GDP will be significantly negative.  Australia’s economy in recent months has dropped into a large hole.

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Global Markets
Global equities suffered a setback last week as minutes from the latest Fed meeting suggested it was closer to “tapering” its bond purchases somewhat earlier than anticipated.  Specifically, the minutes indicated “most” members agreed that tapering could commence this year (as opposed to early next year), assuming the economy continued to broadly recover in line with their expectations. 

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Today’s lower than expected wage price index result only highlights the challenges facing the Reserve Bank in attempting to get wage inflation up to the 3 to 4% p.a. levels considered consistent with it’s 2 to 3% inflation target.  As it stands, annual growth in the wage price index was only 1.7% in the June quarter,

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Global markets

Global equities continued to grind higher last week reflecting ongoing solid corporate earnings and still relatively benign bond yields. Indeed, lingering fears with regard to the potential impact of delta on economic growth are likely helping offset fears which may otherwise have arisen from strong U.S. economic growth and associated interest rate fears.

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Global markets
Global equities pushed onwards last week as solid U.S. earnings and economic reports outweighed concerns with regard to eventual Fed tapering and the pesky delta variant. Although U.S. July manufacturing indices were a touch weaker than expected, they were nonetheless still very strong – with service sector indices even stronger!

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S&P 500 Index

Global markets*

After pushing to new highs, last week appeared one of consolidation for global equities – buffeted by continued solid economic growth and corporate earnings reports on one hand, and concern with the delta spread and China’s regulatory crackdown on the other. Long-term bond yields also continued to trend lower.

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Although the unwinding of COVID related price subsidies helped boost annual consumer price inflation in the June quarter, the fact remains that underlying inflation – as measured by the trimmed mean – remains well below the Reserve Bank’s target.  Along with the extension of Sydney’s lockdown to end-August, this virtually eliminates any chance the RBA will reduce its bond buying program in September.

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