The US equity market continued to power ahead in February advancing a healthy 5%, driven almost exclusively by the ongoing euphoria concerning artificial intelligence chip manufacturer Nvidia, which in many ways has become the talisman for the overall US share market. The Australian market was more subdued improving by 0.8% following a local reporting season that marginally exceeded expectations.
On the economic front, the December quarter GDP in Australia showed modest growth of 1.5% for the 2023 calendar year subdued by weakening domestic demand showing that tighter monetary policy is having the desired effect. Of some concern to the RBA is that wages increased by 4.2% over the past 12 months which in the absence of significant productivity gains, will keep inflation sticky around the current 4% level and probably restrain the RBA from cutting interest rates until late in the year. Elsewhere in the world, the Japanese share market has finally awoken from its decades long deflation induced slumber to post a 5.5% gain while China regained some of its recent lost ground by gaining 6%.
Bond markets were fairly quiet with both US and Australian 10-year government bonds yields increasing by around 10 basis points to each settle around 4.2%. Commodity prices were weaker with iron ore falling 7% reflecting the expectation of lower demand from a weakening Chinese economy while the Australian dollar was marginally weaker finishing at just over US 65 cents. In the cryptocurrency space, the bitcoin price has rallied strongly in recent months to around $US 69,000 per coin following increased demand from a range of newly released bitcoin ETF’s. While investors have made handsome profits in this fledgling market, it remains a highly speculative form of investment and is yet to demonstrate any practical utility value as a form of private currency as was its original intention.
