Daily Commentary BY THE CURVE TEAM –

Uncertainty Hits Markets

22nd of September, 2020

Uncertainty has affected markets overnight as fears of second waves of Covid-19 mount overseas.

As Australia contains the spread of Covid-19, fears of a second wave in Europe mount. Reports are circulating in Britain of renewed lockdown laws being imposed as a second wave gathers pace. Elsewhere case numbers continue to grow.

As a result, European stock markets fell sharply overnight. The European stock market (Eurostoxx) was down nearly 4% and Britain’s was down over 3%.

The US stock market also fell, with the S&P 500 down over 1%. ASX futures point to a similar decline in the domestic stock market today.

Stock market falls are relevant in so far as they create fear among consumers and stoic financial instability. At the beginning of the pandemic panic set into financial markets, which prompted the RBA and other central banks to step in and provide swathes of liquidity to maintain stability.

For the past few weeks the US market in particular has seen consistent declines in stock indices. Should this translate to further instability or panic, there will be more pressure on central banks to do more.

The market instability comes as there are suggestions that the RBA will ease further next month. As mentioned in yesterday’s commentary, Guy Debelle’s speech today is much anticipated to see if there is any indication that the RBA will change their policy and/or how they will do it.

Weekly payrolls and wages data up to September 5 will also be released this morning. This is a pre cursor to the JobKeeper amendments that kick in next month, which will inevitably hit payrolls and wages.

Josh Stewart

Client Relationship Manager