Australian Economy – Much of the data out in March pointed to an improving economic landscape at home, with jobs1 up by 50,000, the trade surplus1 back above $1B and the December quarter GDP growth figure1 coming out at a better-than-expected 0.8%. This sign of strength is a likely reason for the bounce back of the $A and reluctance of the RBA to push ahead with any further interest rate cuts.
Global Economy – The QE program in the US is continuing to be slowly wound down, pulled along timidly by a steadily growing US economy. In Europe, QE was given a greater licence after the German High Court ruled the European Stability Mechanism (ESM) to indeed be constitutional, along with Brussels agreeing on a banking union. This is against the backdrop of a sputtering European economy, with signs of life starting to appear in some of the hardest hit countries (Greece, Portugal, Cyprus, Spain). In China, the march to deregulation continued with the Central Bank widening the trading range of the Renminbi, but most are concerned with the ongoing economic deceleration in China and how long it is likely to continue.
Investment Markets – A relatively lacklustre March, with an upswing in the last half of the month helping most markets to finish flat. This rounded out an up and down start to the year, with markets in Australia, the US and Europe pretty close to where they started 2014, whilst Japanese equities have come back down to reality (down about 9% since December2) and Chinese equities also dropping quite a lot over the same period (almost 8%2).
Outlook – The situation in the Ukraine has threatened to awaken the ghosts of the cold war, with Russia taking back Crimea in a somewhat peaceful manner, but with the West worrying about Russian expansion. Though this issue is not likely to be a threat to overall global economic conditions, a shutdown of gas imports into Europe is likely to cause some short-term pain (which is why it will likely be avoided). The big question mark continues to hover over China, with hopes that the centralised Government will be able to handle the shadow banking system effectively and push economic growth through the next phase of China's long-term plans.
S&P/ASX 200 – 12 months to 31 March 2014
Source: Core Equity Services
Footnotes: 1. Data from Australian Bureau of Statistics; 2. Bloomberg data.
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