Global economic recovery on track
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The latest weekly economic and market report from AMP Capital Investors points to the growth in equities, commodities and commodity currencies such as the Australian dollar as signs of market recovery, with the rallying of share markets after a two month period of correction also a key indicator of market buoyancy.
It predicts the key ASX200 and All Ords indices are likely to reach the 5000 level in the next couple of weeks, marking a significant turning point for many investors.
With the strength of Australian economic data continuing, further rate hikes are also likely, the report suggested. “While new home sales were flat in November and private sector credit remains soft reflecting weak business credit, data for house prices, car sales, building approvals and retail sales were all robust. Against this backdrop more interest rate hikes are on the way,” says Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors.
Oliver suggests a rate move is likely as early as February or March, with the cash rate rising to 4.5% by the middle of 2010 and 4.75% by year end. Key indicators of the RBA’s decision are the December employment report due for release this week and the December quarter inflation figures due at the end of January.
In addition, data for housing finance, the National Australia Bank business survey and employment will all be watched closely in the weeks ahead. Employment is expected to show another gain of around 10,000 in December with the unemployment rate likely to have remained at 5.7%.
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