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Equity and commodity markets continued to recover off their mid-February lows helped by reasonable economic data, supportive central banks and improved sentiment:
- Oil prices continued to move higher, up another 13% in March
- China economic data was, on balance, a little better
- US economic data continued to improve
- The European Central Bank surprised investors with the size of the additional stimulus measures that it announced in early March to try to combat disinflation
- Australian business conditions outside the mining sector continue to improve
- RBA retains cash rate at 2.0%
Global equity markets continued to rise off their mid-February lows helped by a recovery in commodity prices, particularly oil, further monetary policy stimulus from the European Central Bank and commentary from the US Federal Reserve that downplayed the likelihood of further US interest rate rises in 2016.
In the United States, soft Gross Domestic Product (GDP) and Institute for Supply Management (ISM) manufacturing readings in late 2015, which had spooked investors in early 2016, have pleasantly surprised in recent months. GDP growth in the fourth quarter was again revised higher, from an initial reading of 0.7% annualised, to 1.4% annualised.
As expected, the European Central Bank (ECB) introduced additional measures to combat deflation with the main surprise being the larger asset purchase program, up from 60 billion Euro to 80 billion Euro per month.
February data on the export side of the economy was weak with annual industrial production growth of 5.4% the weakest since November 2008 – but part of the slowdown was due to a large decline in tobacco production. Additionally exports contracted by 25.4% in February compared with February last year.
In Japan the second reading on fourth quarter 2015 GDP saw the economy’s estimated performance revised to -1.1% annualised from -1.4% previously, thanks to a stronger than previously estimated uplift in business spending and, less positively, higher inventories.
The Reserve Bank of Australia (RBA) retained the cash rate at 2% at its April meeting. The RBA continues to monitor whether recent improvements in the labour market are continuing.