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Daily Market Commentary 7th September 2023

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The Fed released the ‘Beige Book’, observing there was modest growth in all areas, price growth was slowing, and hiring was subdued. This is the direction the Fed has been looking for, with the labour markets cooling and inflationary pressure falling. It will now be up to the Fed to decide whether they need to raise rates further, or hit the pause button, and recognise ‘peak inflation’. US Bond Yields remain high, and on the rise, with the yields curve remaining inverted as the 2-year blows through 5%. These are strong recession indicators. German Factory Orders contracted 11.7%, the biggest fall since the pandemic lockdowns, pointing to the further crises within the German economy. The EUR fell back to 1.0700, while the GBP, dipped below 1.2500.

Australian GDP rose 0.4% for Q2, and 2.1% for the year, but this is a ‘bait and switch’. The Australian economy has absorbed more than 600,000 immigrants, which has boosted GDP by sheer population growth. Adjusted for population growth (Per Capita GDP), Australia has suffered sharp contractions for 2 consecutive quarters, thus a per-capita recession. Western economies use immigration as a support for GDP growth, where the reality is somewhat the opposite. The Australian Dollar continues to underperform, trading down to 0.6360, while the NZD slumped to 0.5860.

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