7 Apr 2017
RBA & APRA brakes to housing market
Markets
- Local and global equity markets had a rather stagnant week with the exception of China and India pushing higher.
- US bond yields have continued to fall (prices higher) as investor confidence regarding President Trump’s ability to develop coherent policy and execute wanes.
- The banking regulator has announced a series of measures aimed at controlling the risks in the housing market. Key measures included limiting new interest-only lending to 30% of total new lending, maintaining the 10% growth cap on investor lending, and tighter controls on higher risk categories of lending (ie. interest-only loans with LVRs above 80%). Measures long overdue and a little on the weak side.
- The oil price continues to be range bound, supported by increasing demand as economic activity picks up, whilst hampered by the supply response, as the March quarter saw the biggest quarter for rig additions since 2011.
- Spot prices for Australian coking coal jumped 44% as Chinese steelmakers scrambled to buy cargoes ahead of an expected shortage caused by cyclone Debbie.
Economics
- Australian retail sales had a poor February, with sales falling against expectations of a gain. Clothing, footwear and accessories sales fell, whilst furniture, hardware, and homeware sales fell even in light of strong building approvals.
- NSW and QLD saw a spike in building approvals, with the national average coming in stronger than expected, driven by both detached houses and apartments.
- The Reserve Bank of Australia left rates unchanged as expected. New comments in their statement included a positive tone regarding global trade and tighter labour markets, contrasted with low inflation and softer Australian labour market data. They made very specific mention of increased banking supervision and new banking regulations regarding residential housing loans.
- Australia’s February trade surplus jumped to the 2nd highest level ever recorded coming in at more than double the level expected by economists. High commodity prices and surging export volumes the cause.
- US inflation in consumer goods and services rose to 2% in February for the first time since 2012. Not high enough to worry the US central bank regarding the pace of rate rises, but a positive for the economy nonetheless.
- China’s manufacturing sector expanded at the fastest pace in 5 years, adding to the strong momentum in economic data year to date.
- European inflation data for March printed below expectations, which was consistent with softer readings from Germany and Spain.
- UK economic growth rose strongly in the 4th quarter of last year, whilst their current account deficit (ie. value of imports exceeding exports) halved in the same period owing to a much lower pound.
Politics
- St Petersburg metro was bombed in an attack that saw at least 10 killed and more than 50 wounded. Russian authorities located and deactivated a second device at another subway station. No doubt linked to Russia’s activities in Syria.
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