AUSTRALIA: VIEW: Westpac Sees Inflation Risks With A Period Of “Subpar” Growth
Q1 GDP printed slightly higher than Westpac expected due to stronger household consumption than assumed. It warns that there could now be a period of “subpar economic growth” if there is a “shaky” transition from public to private growth, which is not being helped by heightened global trade uncertainty. At the same time, productivity and unit labour cost data in today’s release point to some upside inflation risks. Thus the RBA is “stuck between supporting growth and managing inflation risks”.
- “The Australian economy slowed significantly in the March quarter, lifting 0.2%qtr and 1.3%yr (on a par with the weakest reads since the early 1990s recession, excluding the COVID period). Notably, GDP per person resumed to fall, down 0.2%qtr and 0.4%yr after stabilising in Q4 last year.”
- “In line with our updated expectations, public demand fell and the private sector struggled to pick up the slack. While one-off factors, mainly related to bad weather events in Qld and NSW, played a role, underlying momentum is undoubtedly weak.”
- “Without a material pick-up in private demand the economy could be set for a period of subdued growth.”
- “Today’s Accounts also show that aggregate productivity continues to be weak down 1.0%yr, and growth in the economy’s cost base (or nominal unit labour costs) remains elevated at 6.1%yr.”
- “After experiencing the largest decline in purchasing power on record, the consumer remains cautious and more interested in rebuilding balance sheets than boosting spending.”
- “Public spending remains elevated, but as we predicted in our preview, growth has declined as we pass the peak in construction activity related to large infrastructure projects. There was also a pull back in state and local government consumption as temporary cost of living support has been wound back.”
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BRENT TECHS: (N5) Bearish Theme Despite Late Bounce
- RES 4: $78.10 - High Jan 15
- RES 3: $75.81 - High Feb 20
- RES 2: $74.63 - High Apr 2 and a bull trigger
- RES 1: $64.91/67.67 - 20- and 50-day EMA values
- PRICE: $59.43 @ 06:44 BST May 5
- SUP 1: $58.00 -Low April 9 and the bear trigger
- SUP 2: $56.29 - 2.236 proj of the Feb 20 - Mar 5 - Apr 2 price swing
- SUP 3: $55.10 - 2.382 proj of the Feb 20 - Mar 5 - Apr 2 price swing
- SUP 4: $54.00 - Round number support
A bearish theme in Brent futures remains intact and today’s fresh short-term cycle low reinforces current conditions. Last week’s price action confirms recent gains between Apr 9 - 23 as corrective that allowed an oversold condition to unwind. Sights are on $56.29 a Fibonacci projection. On the upside, key resistance to monitor is at the 50-day EMA, at $67.67. Initial resistance is at $64.91, the 20-day EMA.
EURJPY TECHS: Pierces The Bull Trigger
- RES 4: 165.88 2.0% 10-dma envelope
- RES 3: 165.43 High Nov 8
- RES 2: 164.90 High Dec 30 ‘24 and a key medium-term resistance
- RES 1: 164.63 High Mar 18 and the bull trigger
- PRICE: 163.46 @ 07:01 GMT May 5
- SUP 1: 162.37 20-day EMA
- SUP 2: 161.65 50-day EMA
- SUP 3: 160.99 Low Apr 22
- SUP 4: 159.48 Low Apr 9
A bullish theme in EURJPY remains intact and last Thursday’s rally reinforces current trend conditions. The cross has pierced key resistance at 164.19, the Mar 18 high. A clear break of this hurdle would confirm a resumption of the bull cycle that started Feb 28. This would open 164.90 next, the Dec 30 ‘24 high. First key support to watch is 161.65, the 50-day EMA. Clearance of this level would undermine the bull cycle.
EUROZONE ISSUANCE: EGB Supply - W/C 2 May, 2025
Austria, Germany, France, Spain and Ireland all look to hold auctions in the upcoming week. There is also a possible Belgian syndication in upcoming weeks. We pencil in estimated gross issuance for the week of E26.1bln, down from E35.0bln this week.
For the full MNI Issuance, Redemption and Cash Flow Matrix click here.
- On Tuesday, Austria will look to hold an RAGB auction. On offer will be a combined E1.725bln of the on-the-run 10-year 2.95% Feb-35 RAGB (ISIN: AT0000A3HU25) alongside the 20-year 3.15% Jun-44 RAGB (ISIN: AT0000A0VRQ6)
- Also Tuesday, Germany will come to the market with E4.5bln of the 2.40% Apr-30 Bobl (ISIN: DE000BU25042) on offer.
- On Wednesday, France will look to hold a LT OAT auction (rather than on the usual Thursday due to the VE day public holiday). On offer will be a combined E10-12bln of the on-the-run 10-year .20% May-35 OAT (ISIN: FR001400X8V5), the 1.25% May-38 OAT (ISIN: FR0014009O62) and the 4.50% Apr-41 OAT (ISIN: FR0010773192).
- On Thursday, Spain will hold a Bono/Obli/ObliEi auction. On offer will be the 3-year on-the-run 2.40% May-28 Bono (ISIN: ES0000012O59), the on-the-run 5-year 2.70% Jan-30 Bono (ISIN: ES0000012O00) and the on-the-run 30-year 4.00% Oct-54 Obli (ISIN: ES0000012M93) alongside the 1.00% Nov-30 Obli-Ei (ISIN: ES00000127C8). The auction size will be confirmed on Monday.
- To conclude the week, also on Thursday, Ireland will look to hold an auction. Due to the public holiday on Monday, the details will be announced on Tuesday.
NOMINAL FLOWS: The week ahead sees a single redemption of E1.0bln from a formerly 5-year Lithuanian bond. Coupon payments for the week total E0.4bln. This leaves estimated net flows for the week at positive E24.8bln versus negative E0.9bln this week.
