Investment update for April 2019
Central banks set to turn slowing global growth around
Amid benign inflation and slowing global growth, central banks maintained accommodative monetary policies over April, and equity markets strengthened. Positive economic data pushed government bond yields up in most markets. Australian government bond yields were an exception.
At its mid-April meeting, the International Monetary Fund (IMF) discussed the management of slowing global growth and concluded it expects growth to pick up as the year progresses amid central bank easing.
President of the European Central Bank (ECB), Mario Draghi stated tariff threats in the US and China trade war were hurting European confidence. The US proposed increasing tariffs from 10% to 25% on another $300bn of imports from China. In response, China increased tariff rates on $60bn of imports from the US, but created exemptions for importers negatively impacted by increase. US Secretary of the Treasury Steven Mnuchin indicated the end of trade negotiations was within sight, with the US “open to repercussions” if no deal was agreed.
A second, flexible extension to the Brexit deadline, granted on 12 April, averted a “no deal” outcome. Despite the ongoing uncertainty, UK economic growth continued to be positive, although somewhat subdued.
The People’s Bank of China (PBOC) continued its targeted approach to easing by announcing it will lower the reserve requirement ratio (RRR) for only mid-sized and small banks in May.
In Australia, the RBA kept the cash rate unchanged at 1.5% and the value of the AUD remained at the low end of the range established in recent times. The RBA noted it expects support for the economy from increased infrastructure investment and resources sector activity to offset the pressures from soft household consumption and falling house prices. In recent releases, the RBA revised down its GDP growth and core inflation forecasts, without significant change to the forecast unemployment rate.
Please view our full investment commentary brought to you by our advisers – Frontier – for a more in depth analysis of market conditions this month. The monthly commentary can also be viewed on YouTube.
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