Australian Economy – A large jump in the unemployment rate up to 6.4%1, as well as a plummeting iron ore price, provided some gloom in the month of August. But there are signs that the construction industry is doing a good job in rebalancing the economy away from our resource exporting, which is helping to keep business and consumer sentiment somewhat buoyant.
Global Economy – Another good month for US job growth, despite a tick up in the unemployment rate2, has provided further evidence of sustained growth in the world's largest economy. Fears over a stagnating Europe were realised, with France and Italy seemingly back in recession, despite the ongoing strength of Germany and the UK. And China's recent bounce in manufacturing also seems to be slowing.
Investment Markets – Most markets had a poor start to the month, with drops of around 5-10%. But overall, the US markets bounced back well from a disappointing July, up almost 4% for the month3. European markets were also up, but Japanese markets retreated, whilst Chinese and Australian equities finished flat.
Outlook – Sanctions over Russia, and likely economic retaliations, are a short-term threat to market stability, along with the end to the US Fed's bond purchasing program. This may be why Europe is now looking at beginning their own QE efforts, with money looking to start to flow out of the European Central Bank to help entice greater lending and expansion.
S&P/ASX 200 – 12 months to 31 August 2014
Source: Core Equity Services
Footnotes: 1. Data from Australian Bureau of Statistics; 2. Dept of Labour, USA; 3. Bloomberg data.
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