Daily Market Commentary 9th June 2023

The EU is officially in a recession, at least technically, following the Q1 GDP number coming in as a 0.1% contraction and the Q4 GDP number, being revised back to minus 0.1%. This is no surprise, as the carefully massaged numbers across Europe, have been able to miss the definition of a ‘technical recession’, by the smallest of margins. The collapse in German Manufacturing is at the heart of the problem and the energy crises is major reason. The whole of Europe has been in recession for the last six months or more, technical or not, and this has been brought on by the energy crises, which directly translates into inflation and rising interest rates. The central problem is the energy crises, which is caused by a combination of a conversion to green energy policies and the sanctions on cheap Russian energy. Neither of these problems are even close to be remedied, in fact may deteriorate even further, when energy subsidies end. UK wage growth was 7.2%, the highest in Europe, as is the British inflation, and the ‘wage-price spiral’ continues to accelerate away. The Bank of Canada was the latest Central bank to raise rates, unexpectedly, following the RBA. This was yet another commodity-based country feeling the effects of sagging commodity demand from the recession in Europe and inflationary pressures. Speculation that the Fed will pause rate rises, with ‘peak inflation’ having been reached and passed, is rife and this was reflected in the softer US Dollar. The EUR jumped back to 1.0770, while the GBP spiked to 1.2550, supported by rising Gilts. Markets seem to have forgotten the last Non-Farm Payroll number?

Australian Trade numbers for April were dreadful, with Exports tumbling 5%, while import jumped 2%. Global trade numbers are reflecting recessionary conditions, while commodity prices and demand, reflect this . Despite the economic conditions, the fall in the reserve allowed the AUD to regain 0.6700, while the NZD approaches 0.6100. A quiet close to the week is expected, while market attention will again turn to growth and inflation, in the coming trading week.