{"id":71116,"date":"2021-01-04T10:30:00","date_gmt":"2021-01-04T15:30:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=71116"},"modified":"2023-01-20T14:55:57","modified_gmt":"2023-01-20T19:55:57","slug":"the-asia-pacific-week-ahead-jan-4-8-australian-economy-in-stable-recovery","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/the-asia-pacific-week-ahead-jan-4-8-australian-economy-in-stable-recovery\/","title":{"rendered":"The Asia-Pacific Week Ahead (Jan 4-8): Australian Economy in Stable Recovery"},"content":{"rendered":"\n<p>Market participants in the week ahead are set to receive updates on the state of Australia\u2019s economic recovery, while supportive monetary and fiscal policies help drive investors\u2019 appetites toward riskier assets.<\/p>\n\n\n\n<p>Preliminary data seem to show that the growth of Australia\u2019s services and manufacturing sectors has maintained its positive momentum through the end of the fourth quarter of 2020, amid an easing of COVID-19-related restrictions, as well as following the largest contraction in the country\u2019s GDP since at least the 1930s earlier in the year.<\/p>\n\n\n\n<p>Pollyanna De Lima, economics associate director at IHS Markit, recently said that the Australian economic recovery was not only sustained in December, but \u201cgrowth also gathered momentum as the loosening of COVID-19 restrictions underpinned further improvements in demand for goods and services.\u201d<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1100\" height=\"619\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2021\/01\/001_Markit-PMIs-1100x619.jpg\" alt=\"IHS market australia PMIs maintain expansion in Q4 2020\" class=\"wp-image-71117 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2021\/01\/001_Markit-PMIs-1100x619.jpg 1100w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2021\/01\/001_Markit-PMIs-700x394.jpg 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2021\/01\/001_Markit-PMIs-300x169.jpg 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2021\/01\/001_Markit-PMIs-768x432.jpg 768w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2021\/01\/001_Markit-PMIs.jpg 1280w\" data-sizes=\"(max-width: 1100px) 100vw, 1100px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/619;\" \/><\/figure>\n\n\n\n<p>This heightened level of demand has generally promoted a quickened pace of expansion in the nation\u2019s private sector output \u2013 in fact the quickest pace in five months. The renewed strength also appears to have helped labor market conditions, as De Lima observed that both goods producers and service providers continued to hire extra staff, the former to the greatest extent in close to three years.<\/p>\n\n\n\n<p>However, she pointed out that one area in the country\u2019s economy that \u201cfailed to improve was exports, with stricter lockdown measures in some nations, border controls and travel restrictions continuing to restrict external demand for Australian goods and services.\u201d She added that the country\u2019s latest fall in international sales was its eleventh in successive months.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-central-bank-fiscal-fuel\"><strong>Central Bank &amp; Fiscal Fuel<\/strong><\/h2>\n\n\n\n<p>Meanwhile, the Reserve Bank of Australia (RBA) committed to a more dovish monetary policy stance at its November meeting, including cutting its cash rate target to 0.10% from 0.25%, where it had resided since March, as well as purchasing $100 billion worth of government bonds with maturities ranging from around five to 10 years over the next six months.<\/p>\n\n\n\n<p>The RBA further noted its intentions not to increase the cash rate target until actual inflation is sustainably within its target range of 2\u20133% \u2013 and this amid expectations that both headline and trimmed mean inflation will bottom out below 1% in 2021 and reach 1.5% by the end of 2022.<\/p>\n\n\n\n<p>To date, Australian inflation stands at around 0.7%.<\/p>\n\n\n\n<p>The central bank said its focus over the period ahead will be on its government bond purchase program, and that it is \u201cprepared to do more and undertake additional purchases,\u201d as circumstances warrant.<\/p>\n\n\n\n<p>The bank\u2019s accommodative policy to support Australia\u2019s recovery joins the Australian government\u2019s fiscal stimulus measures to help buoy the country\u2019s labor market, credit flows, and overall economic strength.<\/p>\n\n\n\n<p>To these ends, the Commonwealth government has poured roughly A$270 billion (~13.75% of GDP) worth of funding and revenue measures into helping provide economic relief through fiscal years 2023-2024, while state and local level authorities have committed around A$50 billion to help business and households.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-boost-to-risk-appetite\"><strong>Boost to Risk Appetite<\/strong><\/h2>\n\n\n\n<p>The outsized responses from both the RBA and the Australian government to help keep the country\u2019s economy humming in the face of COVID-19 appears to have helped bolster investors\u2019 appetite for riskier assets, as well as strengthen perceptions about the country\u2019s ability to honor its sovereign debt obligations.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1100\" height=\"619\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2021\/01\/002_EWA_ASX-1100x619.jpg\" alt=\"Australia focused ETF outpaces broader index\" class=\"wp-image-71118 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2021\/01\/002_EWA_ASX-1100x619.jpg 1100w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2021\/01\/002_EWA_ASX-700x394.jpg 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2021\/01\/002_EWA_ASX-300x169.jpg 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2021\/01\/002_EWA_ASX-768x432.jpg 768w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2021\/01\/002_EWA_ASX.jpg 1280w\" data-sizes=\"(max-width: 1100px) 100vw, 1100px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/619;\" \/><\/figure>\n\n\n\n<p>For example, the iShares MSCI Australia&nbsp;ETF (NYSEARCA: EWA), which has among its top holdings financial sector firms Commonwealth Bank of Australia (OTCMKTS: CMWAY) and Westpac Banking Corp (NYSE: WBK), as well as retail giant Woolworths Group (ASX: WOW), has gained roughly 9.0% year-to-date in 2020 \u2013 with positive returns of more than 23% over the past three months.<\/p>\n\n\n\n<p>Over the same three-month period, the EWA ETF has outpaced the broader S&amp;P\/ASX 200 index by roughly 2.5%.<\/p>\n\n\n\n<p>Also, over the past three months, credit default swap (CDS) spreads on Australia\u2019s 5-year government bonds have narrowed by around 3 basis points to nearly 15.3 bps.<\/p>\n\n\n\n<p>Investors watching Australia\u2019s economy for further signs of recovery and growth momentum will likely be eyeing the slate of incoming data releases in the week ahead, including IHS Markit\u2019s Services and Composite PMIs, the RBAs Chart Pack, as well as a fresh look at the country\u2019s trade balance.&nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>On the Calendar:<\/strong><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Tuesday, Jan 5<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li>IHS Markit \u2013 Australia Services PMI (F-Dec)<\/li><li>IHS Markit \u2013 Australia Composite PMI (F-Dec)<\/li><li>RBA Chart Pack<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Wednesday, Jan 6<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li>Trade Balance (Nov)<\/li><li>Exports \/ Imports (Nov)<\/li><\/ul>\n\n\n\n<p>In the meantime, select the Event Calendar option in the IBKR Trader Workstation for a full list of U.S. and global corporate events and earnings, dividend schedules, economic data, IPOs and more.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1100\" height=\"619\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2021\/01\/LAST_TWS_1-1-1100x619.jpg\" alt=\"\" class=\"wp-image-71119 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2021\/01\/LAST_TWS_1-1-1100x619.jpg 1100w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2021\/01\/LAST_TWS_1-1-700x394.jpg 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2021\/01\/LAST_TWS_1-1-300x169.jpg 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2021\/01\/LAST_TWS_1-1-768x432.jpg 768w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2021\/01\/LAST_TWS_1-1.jpg 1280w\" data-sizes=\"(max-width: 1100px) 100vw, 1100px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/619;\" \/><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>Market participants in the week ahead are set to receive updates on the state of Australia\u2019s economic recovery, while supportive monetary and fiscal policies help drive investors\u2019 appetites toward riskier assets. <\/p>\n","protected":false},"author":2,"featured_media":42745,"comment_status":"closed","ping_status":"open","sticky":true,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4,14,18,8,9,26,3],"tags":[225,471,9016,528],"contributors-categories":[13576],"class_list":{"0":"post-71116","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-asia","8":"category-etfs","9":"category-macro","10":"category-region","11":"category-securities","12":"category-text-articles","13":"category-traders-insight","14":"tag-australia","15":"tag-central-bank","16":"tag-credit-default-swap","17":"tag-pmi","18":"contributors-categories-interactive-brokers"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v27.3) - 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