Poor jobs numbers in the US set the tone, raising concerns about global economic growth.
Iluka Resources (ILU) was one of the best performers of the week, surging over 10% after announcing big pricing upgrades for its minerals.
Oil giant Woodside Petroleum (WPL) had a tough week, dropping 4.7%.
Some of the financials gained ground on the back of the RBA’s decision to keep interest rates on hold.
Most of the banks gained ground with Westpac (WBC) climbing 2.3%.
Retailers continued to struggle despite the RBA’s decision to keep rates on hold.
Economic News. What Does it Mean?
It was a busty week on the economic data front, with the keys being weak employment numbers and the RBA’s decision to keep rates on hold for another month.
- > Job ads data released on Monday showed a slump in May.
- > Total job ads dropped 6.5% in May, the weakest result in two years.
- > The data suggests we could see some weakness in the employment market in coming months, and the unemployment rate could move back above 5% this year.
As expected the RBA decided to keep interest rates on hold at 4.75% no Tuesday, as they have since November last year.
Last month the RBA signalled that it would have to raise rates further at some point to combat expected inflationary pressures, however recent economic data has made this less urgent.
While the RBA is mostly focused on the mining sector strength, and its effect on wages and the country’s terms of trade, the reserve bank has revised lower its expectations of investment from outside the resources sector.
Despite Monday’s surprisingly weak job ads numbers, the RBA noted that wages growth has returned to pre-GFC levels.
Overall the statement was a little less hawkish (less supportive of higher interest rates), and the Aussie dollar fell on the news.
It is now seen as unlikely that the RBA will raise rates next month either, although a hike in the next few months is still being priced in by the market.
On Wednesday data showed the number of new home loans taken out rose by 4.8% in April, double the expected 2.4% rise for the month.
The data was a much needed shot in the arm for the property sector, and suggests buyers are re-entering the market after being spooked by seven rate rises in less than two years by the RBA and signs of softening prices in recent months.
Together with softening prices, increased competition in the mortgage sector should help to improve housing affordability moving forward.
In contrast, jobs data released on Thursday by the ABS today painted a weaker-than-expected picture of the Australian economy.
While the unemployment rate remained steady at 4.9%, only 7,800 jobs were added during May, well below the 25,000 expected by the market.
In another sign of weakness, 22,000 full-time jobs were shed during the month, just more than offset by a rise in part-time jobs.
The data was the latest in a line of weak economic readings, and follows last Monday’s weak job ads numbers which forecasts the employment market will soften further in coming months.
Overseas Market and Commodity Wrap:
Note: The Australian market was closed Monday for the Queen’s Birthday holiday, but global markets continued to trade. The prices and commentary on this page reflect changes from yesterday’s/last night’s session for overseas markets.
Global equity and commodity markets struggled last week, with concerns about European debt and growth in the US lingering.
American markets really struggled, with the Dow logging a six-session losing streak at one stage week – its worst losing streak since February 2009.
With heavy selling seen across the board and investors seeking safer assets, large blue chip stocks held up better than most, while riskier sectors like tech stocks suffered greater losses.
The Dow Jones lost 1.6% for the week, the S&P 500 fell 2.2% and the Nasdaq tumbled 3.4%.
European markets held up a little better, despite concerns Greek will default on its debt. The FTSE slipped 1.4% for the week.
Asian markets were among the better-performed equity markets, but still finished in the red. The Hang Seng fell 1.9%, the Shanghai Composite dropped 1% and the Nikkei eased 0.5%.
Most commodities also lost ground, with oil one of the worst affected. Oil prices slumped 2.9% over the last week, with most of the losses coming last night when Saudi Arabia agreed to increase supply.
Gold prices fell 1.7% for the week, as concerns about the US economy overpowered inflation fears.
Precious metals were mixed. Palladium (+1.5%) was a rare gainer last week, but platinum dropped (-1%) and silver prices were smashed (-5.4%).
Base metals were mostly weaker, with aluminium (-2.3%), copper (-2.1%) and nickel (-2.4%) all dropping more than 2%. Lead was the sole gainer, rising 3.7% for the week.