MARKET UPDATE

WEEK 1 APRIL 2014

Key themes
Australias Interest Rate Unchanged
Australias economic Data
ECB unchanged interest rates and declining
inflation
Emerging markets Inflow of investment
Policy Stimulus from China
US Data

AUS Interest Rates Unchanged
Interest rates were unchanged at 2.5%
Why?
Accommodate the lower AUD
To support investment - Property/housing a key sector.
Stimulate consumption levels Savings ratio below 10% (but will
be impacted by confidence and unemployment)
Forecasts
Expect interest rates to stay at 2.5% for the coming months.
Necessary to support growing unemployment
Resilient AUD
Inflation becoming a concern

Australian Data
AIGs business condition PMI fell in March,
however higher than its low in March 2013.
Strong trade surplus Export strength and
constraint imports
Retail sales rise for the tenth month in a row
Dwelling construction improving

Economy is rebalancing: relying on housing,
consumer spending & exports over mining
investment.
Europe
Why?
Economy is sensitive to
anything that will stop
credit and loans
Investment,
consumption must
increase to support
growth.
Inflation is below
target levels.
-Forecast
Unconventional monetary
policy
QE potential, but
Institutional Problems

ECB kept interest rates unchanged at 0.25%

Emerging Markets
Inflows into Emerging
markets rise
Since tapering, EM fund
flow has been negative
Has impacted EM asset
levels, currency and
BOP.
Markets in emerging
markets have priced
tapering.

Opportunities are now
back for the EM.


Policy Stimulus China
China unveils mini-stimulus to improve economic growth
Railway investment, upgrade housing for low income, lower tax for
small businesses.


What does this mean:
Tension and worry from
the China
Support for their
structural reform
Stimulus is modest,
supporting GDP growth to
be around 7.5%.
Support for urbanisation
& infrastructure, small
business innovation and
growth.

US Data
ISM business conditions improving in March
Winter chill is shaking off
Labour markets mixed
Non-farms March, 192,000 new jobs
UE unchanged at 6.7%
Trade deficit widened in February
Yellen announces her greater support dovish policy to
support the slow recovery.

We are seeing mixed results in the US, but
growth overall is evident.
Markets
Dow Jones: 16,573 1.89%
S&P 500: 1,889 2.16%
Nikkei: 15,072 3.07%
Hang Seng: 22,565 3.35%
FTSE 100: 6,649 0.93%
ASX 200: 5,423 0.52%
AUD/USD: $0.923 -0.33%
Oil: $106 -1.85%