News & Analysis

Weekly Summary -Sluggish Global Growth

March 8, 2019

By Deepta Bolaky

The economic data releases this week brought back the fears of slowing global growth. The central banks’ statements were also turned around the growth concerns. After two months of rally, investors had little to maintain the bullish momentum.

 Gross Domestic Product (GDP) and Trade Balance

  • Australia

 We saw a slew of economic data which provided further insights on the Australian economy. The economy expanded but at a sharper decelerating rate than expected undershooting the forecast.

The Australian economy went into a per-capita recession. The population grew at around 0.4% while December’s growth stands at 0.2% only. It signals that the economy is expanding but not enough to cope with population growth. The economy is not leading towards a recession, and it is still expanding but at a weaker rate than expected. Retail Sales figures were also weak which reinforced the concerns that the economy is facing many headwinds. 

  • United States

 The Trade Deficit reported mid-week surprised the markets as it climbed to a decade-high. The US-China trade gap has also reached a record high despite trade tariffs.

  • Eurozone

 The final reading of the GDP figures in the Eurozone confirmed the sluggishness in the Eurozone’s economy. The fourth quarter grew at the same pace as the previous quarter while the yearly figures came below estimates at 1.1%. 

The Trade Balance and GDP figures elevated concerns about growth denting sentiment for riskier assets.

Central Banks

  • Reserve Bank of Australia: The RBA left interest rate unchanged at 1.5% and the tone and language were quite similar to last month’s report. However, the economic releases this week had increased the chances of a rate cut. 
  • Bank of Canada: Similarly, the Bank of Canada kept interest rate steady at 1.75%, but sent a cautious signal to the markets. GDP stalled in the fourth quarter and the trade deficit widened, and therefore the BoC toned down its convictions over future interest rates hikes. 
  • European Central bank: The ECB undertook plans for a major policy reversal on Thursday. The deepening economic slowdown in the Eurozone’s economy forced the ECB to announce a new round of measures. Market participants were surprised by the extent of dovishness by the central bank. A continued weakness and uncertainty prompted the ECB to slash its growth and inflation forecasts.

ECB is probably the first one among the major economies to react to the slowing global growth.

Equity markets

The rally since the beginning of the year appears to lose steam as there were not enough positive news on the trade front to push stocks higher. The cautious tone from the central banks about slowing growth also overshadowed risk sentiment. Major equity benchmarks struggled to find upside momentum and were in a sea of red towards the end of the week.

World Equity Indices (%Change)

Source: Bloomberg Terminal

In the Australian share market, the index managed to trade in positive territory but eased on Friday dragged by the materials, energy and financial index.

Source: Bloomberg Terminal

FX Markets

In the currency markets, the US dollar appreciated against major rival currencies despite mixed US data across the week. Given the renewed fears of growth and uncertainties, the US dollar caught some haven bids. The index tracking the performance of the US dollar against a basket of currencies rose above 97 marks.

US Dollar Index (H4 Chart)

Source: GO MT4

Monday, 11 March 2019
Indicative Index Dividends
Dividends are in Points
ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50
0.176 0 0.034 0.164 0 0 0
ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50
0 0 0 0 0 0 0