Global share markets have performed strongly for the quarter ending 30 September 2012. Some key developments influencing markets at the moment include:
Australian Cash Rate
The Reserve Bank of Australia (RBA) has dropped the official cash rate to 3.25% pa mainly due to a softening global economic outlook, slowing growth in China (and the developing world), and the need to stimulate the non-mining sectors of the Australian economy. A further cut before December is also possible depending on these factors and subject to inflation remaining within the RBA’s target range of +2% to +3% pa.
Chinese Growth Slowing
Economic growth in China is slowing as reflected by a fall in the manufacturing and non-manufacturing PMI indexes. However the non-manufacturing index remains relatively high. Overall annual GDP growth is still forecast to be just above +7.0% pa.
Positive US Economic Data
The Institute for Supply Management (ISM) business conditions index rose, unemployment rate dropped to +7.8% (below +8.0% for the first time since the Global Financial Crisis), consumer credit rose and the central bank announced a third round of quantitative easing (i.e. QE 3). This is expected to result in continued rising investor confidence in the US. All eyes now on the Presidential election in November.
Spain’s Sovereign Debt
Spanish short term Government bond yields have come down significantly since the European Central Bank commenced purchasing these bonds in the open market. However, it is expected that Spain will eventually need to apply for assistance from the EU (European Union).
10 Year Spanish and Italian Government Bonds