Daily Market Commentary 8th May 2024

European and US equity markets continued to rally strongly, supported by the growing confidence in Central Bank rate cuts and the conquest over inflation. The Banking in Europe are beneficiaries of a decline in interest rates, as their debt holdings on the balance sheet will improve and consolidation continues. The UBS bank returned to profit and surged their share price, following the Credit Suisse collapse/bail-out/consolidation. The ‘too-big-to-fail’ banks in both Europe and the US, will survive any banking crises, but the regional and second-tier ones, will be the ones under extreme pressure. German Trade data improved, with exports rising, but warnings over growing protectionism, lack of German industry competitiveness, and high energy costs remain. The EUR managed to rally despite a firm US Dollar, jumping to 1.0770, while the GBP dipped back below 1.2500, ahead of the Bank of England Interest rate decision.

The RBA was surprisingly hawkish in their rate decision, warning of further rises in inflation and possible rate rises to come. The RBA also warned of tougher economic conditions, with GDP growth declining, despite massive and record immigration. The RBA is fighting a losing battle as the Government pour on the fiscal taps, fuelling inflation, while the RBA attempts to cool, with higher rates. This contradiction of monetary and fiscal policy will result in more pain for the consumer. The hawkish commentary from the RBA Governor initially boosted the AUD, but the rising reserve popped that bubble and the AUD slipped back below 0.6000, while the NZD relinquished 0.6000.