St George Economics economy and finance update

Share Markets:

Sentiment in equity markets continued to be boosted by expectations that the US economy was improving. There was also some positive news from Europe.

Greece was granted a €6.8bn deal to be paid in instalments on the condition it will continue cutting public sector jobs and selling state-owned assets.

The Euro-Stoxx rose 2.1%. Meanwhile in the US, the S&P500 rose 0.5% the Dow lifted 0.6% and the Nasdaq rose 0.2%.


US treasuries rose (yields fell) suggesting that bonds may have been oversold.

The growing possibility that the Fed could scale back asset purchases has been negative for bonds and sent 10-year yields to their highest since 2011. However, below trend growth and low official interest rates still points to low yields by historical comparison. 

Foreign Exchange:

The US dollar fell against most currencies, with the US dollar index retreating from a three-year high. The euro was supported by the bailout deal for Greece.

Improved risk appetite and a weaker US dollar were positive for the AUD, which rose to around 91.4US cents.


Most commodity prices strengthened, moving inversely with the US dollar, although oil prices fell on easing supply concerns.

Libya and Iraq announced they would resume operations. Gold prices benefited from the dip in the US dollar.


ANZ job ads fell 1.8% in June, after falling a downwardly revised 2.5% in May.

This was the fourth consecutive monthly decline in job ads suggesting the outlook for employment growth is subdued.

For the year to June, job ads are down 18.7%, slightly below the -18.6% rate of decline in the year to May.


Eurozone Sentix investor confidence slipped from -11.6 to -12.6 in the July survey.

Expectations were steady with the decline driven entirely by renewed deterioration in the current situation index.

The concerns about the political situation in Portugal are likely outweighing the European Central Bank's (ECB) easing bias. 

German industrial production fell 1.0% in May, the first fall since January, led by consumer durables and capital goods along with a further decline in energy. Construction pulled back a little after April's jump in activity.

In other data, exports fell 2.4% in May, more than reversing all of this year's modest rise up until April. Overall data from Germany is suggesting that growth remains subdued and not enough to offset mild to deep recession across much of the rest of Europe.


The current account surplus narrowed more than expected to ¥540.7bn in May, from a surplus of ¥750.0bn in April.

This is a 58% increase in the surplus in the year to May, with increased exports and income from overseas investments driving the improvement, indicating the depreciation of the Yen has benefited Japan.

United States: 

Consumer credit lifted US$19.6bn in May following a revised US$10.9bn rise in the previous month.

Consumers appear to be more confident in taking on a bit more debt reflecting the recovery in housing and rising stock prices.

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