Daily Market Commentary 14th August 2020

US equity markets are approaching record historical highs, but choked at the gate, despite US Weekly Jobless Claims falling below 1 million. European share markets also gave up ground, as European economies re-open, reflecting in stronger employment data. The French Unemployment rate fell to 7.1% as they emerge from the pandemic and battle a second wave of the virus. The EUR looks to regain 1.1800, while the GBP flounders around 1.3050, struggling to bounce out of recession.

The Australian Unemployment rate jumped to 7.5%, but these numbers do not include the 100’s of thousands of people on various Government employment programs. The real Unemployment rate is thought to be over 13%! NZ Food inflation rose 4.2%, but people were more concerned about food shortages rather than about cost, as the country plunges into yet another draconian lock-down.

The RBNZ statement, invoking huge increases in Central bank funded debt to pay for the massive Government expenditure on relief/support, is not being received well by markets. NZ Bond yields have collapsed as the Central bank threaten negative interest rates and massive debt monetisation. This is in direct contrast to soaring US Bond yields, which are determined by the market!

The NZD suffered further losses, plunging below 0.6540, while the AUD fell below 0.7150. The lock-down strategy , employed by the NZ and Victorian Governments’ are devastating the economies, which will be many years in the rebuild.