Today’s release of stronger-than-expected Australian jobs data for February confirmed expectations for a rebound after two months of declines.
- Employment increased by 65k in February, above consensus expectations of 50k
- The unemployment rate fell to 3.5% from 3.7% in January, below consensus expectations of a fall to 3.6%
- The participation rate increased from 66.6% to 66.5%
- The underemployment rate fell from 6.2% to 5.8%.
Overall, the stronger-than-expected numbers have reversed the seasonal factors that played a role in the weaker number in the prior two months.
In isolation, a tight labour market and high inflation would typically merit higher rates from the RBA.
However, the events in the global banking sector over the past week mean that inflation is yesterday’s problem. Higher funding costs, stricter regulation, lower margins, and capital raises in the banking sector will restrict the flow of credit to the economy.
Growth and inflation will inevitably slow, which explains why the Australian interest rate market is fully priced for an RBA rate cut by July. July, however, is a lifetime in markets like these. In the meantime, it’s been another brutal day on the ASX 200, which trades 114 points (-1.62%) lower at 6955 at 3pm Sydney time.
There has been further bloodshed in the banks.
- ANZ fell 2% to $22.82
- Macquarie fell 1.84% to $174.82
- Westpac fell 1.85% to $21.25
- NAB lost 1.3% to $27.94
- CBA fell 0.47% to $94.96.
Crude oil fell below $68 p/b overnight on growth concerns which weighed on the Energy Sector.
The big mining stocks are under pressure on global slowdown concerns.
Today’s rout was completed by heavy falls in the tech sector despite the Nasdaq closing higher overnight.
ASX 200 technical analysis
We remain optimistic that the ASX 200 can reclaim the 200-day moving average at 7010 (like it did in early January), and we will stay with the view that the pullback from the Feb 7567 high is countertrend and that a rebound will follow.
However, should the ASX 200 fail to reclaim 7010 over the next 24 hours and then break below the 6905 low of early January, a retest of the bottom of its 12-month range at 6410 is possible.