AU200/AUD

After a range-bound July, the Aussie 200 or ASX SPI 200 climbed in August to reach above the 7,600 mark. However, the index failed to extend gains in September. The Aussie 200 remained choppy during the month with a downward trajectory. Investor sentiment was hit by a decline in commodity prices, especially prices of industrial metals with power outages in China continuing to restrict demand. Moreover, Australian tech stocks tracked Wall Street stocks lower.

Retail sales in Australia fell 1.7% in August, following a 2.7% decline in the previous month, according to preliminary figures. The final reading for August is expected to confirm the third consecutive month of decline in retail trade amid pandemic-related restrictions.

The Reserve Bank of Australia held its cash rate at the record low of 0.1% at its recent meeting. The central bank also confirmed plans to trim government bond purchases to A$4 billion per week. Analysts expect the RBA to keep rates unchanged at its upcoming meeting in October.

The IHS Markit manufacturing PMI for Australia climbed to a three-month high of 57.3 in September, versus 52 a month ago, according to a preliminary reading. The figure was boosted by a rebounded in output and new orders, after August’s contraction. The final reading is expected to confirm the sharp rise in September.

Australia's unemployment rate unexpectedly fell to 4.5% in August. This was much better than market expectations of 4.9% and represented the tenth consecutive month of decline in unemployment as the country’s economy continued to recover from the covid-19 pandemic. However, economists expect Australia’s jobless rate to surge to 5.2% in September.

The Australian economy grew by 9.60% year-over-year in the second quarter, also advancing by 0.7% on quarter. However, the covid-19 restrictions imposed recently are likely to impact the economic recovery. Experts project 4% sequential growth for the third quarter, with the annual growth rate likely to decelerate meaningfully to as low as 1.5%.

The annual inflation rate in Australia climbed sharply to 3.8% in the second quarter, from 1.1% in the previous quarter. The country recorded the highest inflation reading since the third quarter of 2008. For the third quarter, analysts expect inflation to ease to 2.8%.

The index could remain highly volatile in the fourth quarter, as Australia’s largest trade partner China continues to battle with the spread of covid-19 cases. On the other hand, a potential fillip in commodity prices could be a tailwind for Australian stocks. News related to the pace of vaccinations in Europe and other parts of the world will also impact the index. There are also concerns around Australia’s plans to open recreational facilities in major cities resulting in a spike in cases.