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Market Highlights - A look back at February 2018


Australian Economy – The RBA has now kept interest rates on hold at 1.50% for 1 year and 7 months, which matches the previous longest streak, set in 1995/96, when rates were stuck at 7.50%. Interestingly, Australia's manufacturing purchasing manager's index (PMI), which is a measure of manufacturing activity, has also booked a similar streak of positive numbers1.

Global Economy – Turmoil in the White House has somewhat overshadowed the strong economic data that continues to flow out of the US. Job creation and jobless claims are mirroring boom-like conditions, and wages growth is hovering around 5%2. Despite this, the loose fiscal stance of the US is starting flow through to Government coffers, with tax receipts for the first part of the year signalling a potential debt blow-out.

Investment Markets – Inflationary fears and White House issues have kept market participants on their toes. Most equity markets finished well in the red (Japan, Europe, China all finished February down around 5%), however, Australia managed to finish the month where it started. Bonds and the $A also finished the month down3.

Outlook – Loose monetary and fiscal policy in the US is a recipe for high volatility on global markets. The case for much higher interest rates to balance against a widening US budget deficit will become stronger should wages continue to grow above 5% and should inflation start to play catch-up.


S&P/ASX 200 – 12 months to 28 February 2018

Source: Core Equity Services

Footnotes: 1. Australian Bureau of Statistics; 2. US Dept of Labor; 3. Bloomberg data.

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