4th October 2024
Key points
- Oil surges along with Middle East tensions
- Aussie retail sales rebound
- U.S. jobs climb higher
- German inflation falls below 2%
- More cuts coming for the Bank of England
Global Cash Rates & Inflation
● The Reserve Bank of Australia (RBA) Cash Rate now sits at 4.35%pa and the annual inflation rate in the year to August is 2.7%.
● The US cash rate (policy rate) is currently between 4.75%-5.0%pa and the annual inflation rate in the year to August is 2.5%.
● The Bank of England Bank Rate currently sits at 5.0%pa to fight an inflation rate of 2.2% in the year to July
● The European Central Bank Cash Rate (deposit facility) is 3.5%pa, to fight an annual inflation rate of 2.2% in the year to August.
The price of oil is surging as tensions in the Middle East escalate, with increasing speculation that Israel may target Iran’s oilfields in retaliation for Iran’s bold missile strike earlier this week.
With hostilities also escalating in both Lebanon and Syria, the International Monetary Fund has sounded the alarm, signalling that Middle East escalation poses significant risks to the global economy.
Despite these risks, equity markets continue to trade at near all-time highs, underscoring the prevailing exuberance in the belief that global growth prospects remain intact.
With geopolitical uncertainty on the rise and potential volatility increasing, it is prudent for investors to consider whether their portfolios are sufficiently diversified.
While not devoid of risk, corporate fixed-income offers a relatively safer and more consistent income stream compared to equities, providing a unique role within multi-asset portfolios.
Aussie Retail Sales Rebound
Retail sales in August rose by 0.7% from July, surpassing the 0.4% forecast. Year-on-year growth reached 3.1%, up from 2.3% in July.
Sales increased across most categories and all regions, though some of the rise may reflect early spending on spring items.
While this may not signal a lasting surge in retail activity, the data marks a positive shift after two years of stagnant sales.
U.S. Jobs Climb Higher
In August, the number of available job positions in the U.S. saw a notable increase, rising to 8.04 million from 7.71 million in July. This uptick signals continued resilience in the labour market, despite ongoing economic and geo-political uncertainties.
A strong labour market supports consumer spending and business expansion, reducing the likelihood of a severe economic downturn.
For fixed-income investors, this can be seen as a positive development as it suggests sustained economic growth, which can lead to stable or rising interest rates.
German Inflation Falls Below 2%
Inflation in the Euro Area’s largest economy has dropped to its lowest level since 2021, falling from 2% in August to 1.8% in September.
This decline is likely to influence the European Central Bank’s upcoming October rate decision, where expectations have been for rates to remain unchanged.
More Cuts Coming for the Bank of England
This week, comments from the Bank of England Governor suggest the central bank may be preparing for a more aggressive rate-cutting cycle.
With inflation cooling and growth slowing, the BoE could aim to stimulate the economy through deeper cuts, reflecting the bank’s focus on supporting economic recovery amid softer inflationary pressures and a challenging growth outlook.
Week Ahead
- RBA meeting minutes
- Australian consumer and business confidence
- FOMC meeting minutes
- U.S. inflation
*Data accurate as at 04.10.2024
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