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Daily Market Commentary 16th August 2023

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US equity markets plunged overnight, panicked by the prospect of a re-emerging banking crises, with downgrades and warning signals flashing. from two ratings agencies. Moody’s lowered ratings on 10 banks and placed warnings on others, while Fitch warned of dozens of bank downgrades, including JP Morgan. Fears over further interest rate rises adds pressure to the banking sector, sending jitters though the markets, as equities plunged, and bond yields jumped higher. US Retail Sales were much better than expected, coming in at 0.7% rise, while the Empire State Manufacturing Index plummeted deep into negative territory. The EUR slipped back to 1.0900, while the GBP firmed to 1.2700, bolstered by stronger than expected wage growth data. UK wage/salary growth jumped to the highest levels on record, 7.8%, while Unemployment jumped to 4.2%. The wage/growth spiral is extremely inflationary and will mean the Bank of England will probably be forced to continue to raise interest rates.

Chinese economic data releases also missed expectations, with both Industrial Production and Retail Sales missing growth expectations. The Bank of China cut rates, in an attempt to further stimulate the softer than expected economy. The rising reserve and downward commodity price pressure saw the AUD fall to 0.6460, while the NZD dropped back to 0.5950. The RBA Minutes revealed that another rate hike was considered, at the last meeting, but they elected to wait and see how recent rises played out. Wage growth and other inflationary pressures will probably force further action, despite the Government replacing the Governor. NZ Dairy Prices contracted by 7.4%, adding to the economic woes, as the Country goes into full blown election mode.

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