• Local and global equity markets rose this week after the US central bank provided an optimistic outlook whilst the Chinese government pledged support for their economy and markets.
• Chinese stocks staged a huge rebound after the government vowed policies to boost financial markets and increase economic growth. Tech giants were up more than 20%. The government will keep the stock market stable and support overseas share listings.

The Reserve Bank of Australia March meeting minutes shows the bank now sees upside risk to wages growth and that they are broadening their focus to other measures of labour costs. They made clear yet again that they’re prepared to be patient. They have previously indicated a preference for waiting for the next two quarterly inflation prints before raising rates, but the March print may tip them over the edge. That means a 1st rate raise at either the May/June or August/September meetings, which means either 2 or 3 rate rises are likely for this year.

• According to the Australian Bureau of Statistics, Australia’s housing market is now worth almost $10 trillion, with the sector adding roughly $2 trillion over the year, easily breaking the annual record. Other figures from SQM Research showed national rental vacancy rates dropping 1.2% in February, bringing them to their lowest level since Whilst low rates may have contributed to both house price growth and rents, housing undersupply remains a critical problem.
• Local manufacturers are facing the sharpest material and labour cost pressures in nearly 50 years, according to the ACCI, with the ACCI also urging the federal government to rein in spending for this month’s Federal Budget. The problem is the election cycle – cash handouts win votes, and the PM desperately needs to turn things Boosting supply-side capacity and productivity should be the focus of every government around the world.
• Australian employment surged by 77,400 in February following an upwardly revised estimate for January. The unemployment rate dropped to 4% and the participation rate spiked to a record high of 66.4%.
• Australia’s population rose by just 0.05% in the 3rd quarter of 2021 putting further pressure on labour supply with many businesses facing staff shortages. The small lift was driven by natural increase whilst overseas migration subtracted almost 20,000 from the population in the quarter, with an outflow of more than 67,000 over the past
• The US central bank raised interest rates by 0.25% for the first time since 2018, with the decision accompanied by a bullish assessment of the economy from the chairman. US stocks lifted on the news as the rate move and accompanying statements providing much needed clarity. The question now remains regarding the pace and level of rates rises in 2022, ie. how much will the economy be able to absorb before stalling. Economic growth expectations have already been lowered from 4% to 2.8% for this year.
• The US producer price index, which generally reflects supply conditions, rose 0.8% in February, down from January’s upwardly revised 1.2% rise. The drop may put less pressure on the US central bank to raise rates as aggressively as previously
• The Bank of England raised its key bank rate by 0.25% to 0.75% in its March meeting, making it the 3rd consecutive rise in borrowing costs and taking the rate back to pre- Covid levels, with inflation expected to rise further in the coming months.

 

• The US securities regulator put forward a list of 5 Chinese companies that could be delisted if they didn’t measure up to accounting standards and allow US auditors in to review their books. It’s the first time the regulator has enforced the law, with concerns they may widen their list.
• China has moved to extend their Covid-zero restrictions from Hong Kong to the mainland with 17.5 million residents of Shenzhen now in lockdown for a week. Shenzhen is a vital technology hub in China. Extensions and continuation of covid-zero policies will make it very difficult for China to hit their newly announced 5.5% economic growth target and may cause further disruptions to global supply chains given the rest of the world has largely re-opened.
• Iran carried out a missile strike in northern Iraq and suspended negotiations on restoring diplomatic ties with Saudi Arabia. The moves come days after international talks on reviving the 2015 nuclear deal stalled. US weakness on show again, emboldening countries like Russia, Iran, and North Korea.
• Saudi Arabia is in talks to sell oil to China and be paid in Chinese Yuan as relations between the Saudis and the US have deteriorated under the Biden administration. The move would follow that of oil and gas trading between Russia and China which is done using Yuan. About 80% of global oil sales are done in US dollar and the Saudis have exclusively settled their oil contracts in US dollars since 1974.