St George Economics economy and finance update

Share Markets: Statistics pointing towards lower than expected growth in the US saw markets decline in the US and Europe (see below).

The FTSE100 fell 1.1% and the Dax was down 0.9%. Among US markets, the Dow fell 0.8%, while the S&P500 and the Nasdaq were both down 1.1%.


Bond yields reversed yesterday's increases.

In the major markets there was movement out of equities and back into bonds. Surprisingly, investors also bought the bonds of the so-called peripheral nations such as Spain, Greece and Portugal whose bond yields fell.

The usual pattern of 'risk-off' trade sees investors moving away from the bonds of the peripheral nations.

Foreign Exchange:

After almost reaching US$1.05 overnight, the AUD slipped back towards the levels seen yesterday afternoon.

The AUD was weaker against most currencies overnight as traders weighed up the potential impact of slower US economic growth on commodity prices.


The disappointing US jobs and services reports (see below) cast doubt on the pace of future US economic growth. As such, commodity prices were weaker.

Copper and oil prices fell sharply on the news while gold was down on the weak European inflation numbers.


The Governor of the Reserve Bank of Australia, Glenn Stevens, has been reappointed for a three year term.

He was appointed as Deputy Governor in 2001 and Governor in 2006.

Australia's trade deficit improved in February, supported by higher iron ore prices.

The trade deficit came in at $0.2bn, following a $1.2bn deficit in January.

Imports declined in the month, down 0.9% while exports rose 3.3% with resource exports up 3.0% and non-resource exports rising by 3.6%.


Eurozone CPI slipped from 1.8% for the year to 1.7% in the March flash estimate, its lowest since August 2010 and only the second read below 2% since the end of 2010.

United Kingdom:

The UK PMI construction index rose from 46.8 to 47.2 in March, its fifth consecutive sub 50 (contractionary) reading.

United States:

The US ISM non-manufacturing index fell from 56.0 to 54.4 in March, a result at the lower end of expectations.

Some believe the decline is overstated due to post-GFC seasonal adjustment factors. 

The US ADP private payrolls gain of 158k was the lowest since October, and mirrors the slowing in jobs growth seen late in Q1 2012.

This pattern has led analysts to suspect seasonal adjustment issues might also be at play in these numbers.


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