April 2019

The Janus Henderson Global Snapshot explores the themes and trends to watch across key global markets.


Central banks shift dovishly as activity and inflation news stays weak

Image_The Australian flag
Image_The Chinese flag
Image_The Japanese flag
Image_The USA flag
Image_The European Union flag
Image_A selection of Emerging Markets flags

Market drivers:


Growth eases, labour market solid
The Australian economy grew by only 0.2% over the December quarter with subsequent partial demand indicators pointing to modest improvement. Labour market conditions remain solid with the unemployment rate falling to 4.9% in February.


Tax cut
The VAT rate for manufacturers was reduced from 16% to 13% as part of a fiscal package designed to achieve GDP growth of 6.0-6.5% in 2019 - down from 6.6% in 2018. Purchasing managers’ surveys firmed in March, raising recovery hopes.


Target failure
The Bank of Japan left policy unchanged. This was despite lowering its forecast for consumer price inflation, excluding fresh food and the impact of a coming VAT hike, in fiscal year 2019 from 1.4% to 0.9% – far below the 2% target.


Fed U-turn
The Federal Open Market Committee tore up its December guidance for two interest rate hikes during 2019, signalling a neutral policy stance. Core consumption price inflation (excluding food and energy prices) remained below the 2% target at 1.8% in February.


Further weakness
GDP growth grew by only 0.2% in the fourth quarter, while the manufacturing purchasing managers’ index hit a six-year low in March. The European Central Bank strengthened its dovish interest rate guidance, signalling no rise before 2020.

Emerging markets

Inflation fall
Declines in oil and food commodity prices in late 2018 fed through to lower consumer price inflation rates, although core pressures were little changed. Russia was a notable exception, with a VAT hike adding to a rising inflation trend.

Trends to watch:


Door to RBA easing opening
While monetary policy settings are accommodative, the RBA appear open to further easing if consumption and the labour market turn out weaker than expected.


Monetary weakness
Stronger purchasing managers’ surveys and reports of progress in US/Chinese trade talks have boosted economic recovery hopes but money and credit trends remain weak – a pick-up is needed to confirm that policy stimulus is working.


BoJ policy rethink?
Inflation remains too low but bond yields are also undershooting, implying a further slowdown in official buying. Will the Bank of Japan rejig its policy in another attempt to provide stimulus or admit that inflation is unlikely to reach its target?


Inventory adjustment
Business inventories surged in late 2018/early 2019 as demand undershot firms’ expectations. Production cut-backs to clear the overhang may cause GDP growth to fall short of forecasts, with negative effects transmitted through global supply chains.


Survey turnaround?
Business surveys could be bottoming. Economic weakness was foreshadowed by a monetary slowdown in late 2017/early 2018 but money trends have recovered since late 2018, suggesting improving economic prospects – assuming no negative external shocks.

Emerging markets

Fragile currencies
Central banks have shifted dovishly following currency recoveries and a fall in headline inflation, but policy easing could backfire – core inflation trends are less benign and exchange rates could come under renewed pressure unless the Fed cuts rates.

Source: Janus Henderson Investors as at 31 March 2019. Australian market comments are the views of Frank Uhlenbruch, Investment Strategist, Janus Henderson Australian Fixed Interest Team. Global market comments are the views of Simon Ward, Chief Economist. These views should not be construed as investment advice and may differ from those of other Janus Henderson fund managers.


Yield (%)Yield (%) 
 31/12/201831/03/2019Q1 Total Return (%)
Cash rate1.501.500.37
3yr 'generic' Australian government bond1.851.391.70
10yr 'generic' Australian government bond2.321.784.93
Bloomberg Ausbond Bank Bill Index1.981.740.52
Bloomberg Ausbond Treasury 0+ Yr Index2.151.663.93
Bloomberg Ausbond Credit 0+ Yr Index3.042.512.85
Bloomberg Ausbond Composite 0+ Yr Index2.361.863.43
Bloomberg Ausbond Credit FRN Index2.782.391.12

Source: Bloomberg as at 31 March 2019. Note: Yields on indices reflect the weighted average yields of index constituents. Generic bond returns assume a constant duration.

 31/12/201831/03/2019Q1 Total Return (%)
Trade Weighted Index60.7060.50
Oil - spot brent USD per barrel53.1767.5126.97
Iron Ore - USD per tonne70.5882.0616.27
Gold - USD per troy ounce1,282.561,291.480.70
Bloomberg Commodity Index Total Return (USD)159.72169.826.32
S&P/ASX 300 Accumulation Index57,896.2164,216.0510.92

Source: Bloomberg as at 31 March 2019.

Australian economic view

Frank Uhlenbruch

By Frank Uhlenbruch


Frank Uhlenbruch, Investment Strategist in the Australian Fixed Interest team, provides his Australian economic analysis and market outlook.


RBA - will they or won’t they?

Patiently waiting for jobs/output resolution

Central banks around the globe became more dovish following a slowing in the global economy over the latter part of 2018. The Reserve Bank of Australia (RBA) joined the pivot, changing its forward guidance from a tighening bias to neutral bias.

Financial markets have front-run central banks, with both the US and Australian markets pricing in monetary easing. In the US, the cash rate is at the bottom end of the neutral range.

In Australia, monetary policy is accommodative (a falling unemployment rate is testament to that), yet markets have moved to price in a cash rate of 1% and three and 10 year government bonds have fallen to historical lows.

A factor behind recent moves has been the spectre of weaker activity data. The Australian economy grew by 1.9% over the first half of 2018 and only 0.4% over the second half of the year, yet the labour market has held up and actually improved over the second half of 2018. This momentum has carried over into 2019 with employment rising by 21,500 on average over the first two months of the year.

Whether market expectations for further cuts in the cash rate are realised will depend on how the gap between output and employment closes. If the labour market holds up and output recovers, the most likely scenario is for the cash rate to remain at 1.5% over the next couple of years. Sluggish growth that drags the labour market down with it would see the RBA validate market expectations.


Source: Janus Henderson Investors, Australian Bureau of Statistics. * monthly average to February 2019. As at 31 March 2019.

This information is issued by Janus Henderson Investors (Australia) Institutional Funds Management Limited (AFSL 444266, ABN 16 165 119 531). The information herein shall not in any way constitute advice or an invitation to invest. It is solely for information purposes and subject to change without notice. This information does not purport to be a comprehensive statement or description of any markets or securities referred to within. Any references to individual securities do not constitute a securities recommendation. Past performance is not indicative of future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

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