Daily Commentary BY THE CURVE TEAM –

Step Forward In Trade Negotiations & Business Conditions Surprises

10th of April, 2018

News this morning reads that US-China trade negotiations have taken a step in the right direction. Markets jumped at the news while looking back to yesterday, the NAB Business Survey release begged the question, are business conditions on the way back?

The big development overnight was around the ongoing trade saga between the US and China, this time for the right reasons. Chinese President Xi Jinping was out overnight indicating the willingness to relieve some pressure by reducing tariffs and opening up the banking and auto sectors.

US President Trump was quick to give praise in the form of a tweet.

This coupled with Facebook CEO Mark Zuckerberg’s testimony to Congress had markets continue to gyrate with equity indexes drifting higher while Treasuries and the USD fell.

The interesting development domestically however came out of the Nab Business Survey yesterday. As largely regarded as one of the pillars of strength for the Australian economy, business conditions declined 6pts to sit at 14 while business confidence also slumped 2pts to 7.

While conditions remain above the long run average, looking deeper it doesn’t look all that rosy with trading conditions, profitability and employment conditions all falling. The latter will be of particular importance for the RBA who are looking for the ongoing strength in the labour market to slowly eat away at the slackness in the labour force to put pressure on wages.

A lot happening today with the highlight domestically being around the consumer and despite being on the rise for the last few months, the ongoing volatility in the market could apply pressure. Looking offshore and the US CPI figure will have markets watching.

Oliver Parsons

Client Relationship Manager