Blue Mountains Bushfires

A Sniippet of the weekly news #2 – Feb 2020

Welcome to this week’s Sniipet of news. Each week the team at Sniip trawl the web looking for key business and financial stories to sum up and pass along to you. The highs and the lows will always be present affecting global markets and the local business environment but the last few weeks have definitely seen a wave of negative news washing across indexes and crashing into economies across the globe. Fear and uncertainty are causing turmoil in markets across the world as stories continue to pour in on the coronavirus outbreak in China while in more local news the fires in Australia are continuing to burn. The impact of the fires on affected communities will be incalculable and economists are already warning of the follow through effects to the broader Australian economy as a whole.

Recent positive economic indicators exclude impact of bushfires/coronavirus

A slew of positive economic indicators had the treasurer crowing last week but economists have been quick to point out many of the indicators only track up until November 2019. For many of Australia’s key indicators the impacts of the bushfires and the coronavirus is yet to be included in the data. Low interest rates both here and in America are positive tailwinds for the economy with signs of growth especially in the Australian housing market but the governments focus on a budget surplus could prove reckless. There is a clear and growing argument amongst economists for fiscal spending to try and offset the shocks currently buffeting the economy.

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Reserve Bank leaves interest rates on hold

The RBA has left their cash rate at 0.75%. Markets were unsurprised anticipating no cut in spite of the potential impact of both the coronavirus and Australia’s bushfire disasters. Traders currently view a cut at the next meeting in March more likely pricing in a two out of three chance of rates being at or below 0.5% after the boards next announcement. While acknowledging both coronavirus and the impact of the bushfires RBA governor Phillip Lowe pointed towards the ongoing trade war between the U.S.A. and China as continuing to be the biggest economic headwind facing the Australian economy. Some economists have found the boards lack of concern regarding the coronavirus surprising especially given the clear economic impact of the government’s recent decision to close our border to travellers from China.

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Dr Copper surges overnight on news of Chinese stimulus

The economic bellwether has jumped in overnight trading as China’s central bank begins moves to offset the impact of the coronavirus on the Chinese economy. Benchmark copper on the LME rose 1.7% to US$5,618 a tonne from Monday’s five month low of $US5,523. While many are hailing the jump as a sign of a recovery in economic growth some experts are cautioning too much exuberance. Market watchers point to manufacturers trying to lock in prices at or near the recent low as a potential source of demand for contracts. From a longer-term perspective, the ongoing global headwind of the US-China trade war has yet to be resolved. It’s impact, and the ongoing disruption of global supply chains from the coronavirus outbreak, will likely weigh on the global economy long after China’s stimulus activities are complete.

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