Sentiment towards risk assets has continued to improve over the past week, but conflicting signals and opinions have investors split over where markets may be headed from here.

Volatility is trending lower, and there have been early indications of some limited success in containing global inflation: US inflation data for July was lower than expected at 8.5%, and US producer prices declined for the first time in years.

As a result, hopes of easier monetary policy ahead are drawing some equity buyers back to the market, although others suspect the current optimism may prove a little premature.

The number of Australian companies appointing external administrators soared by 46% in July year-on-year as the era of cheap credit comes to an end.

However, both ANZ and CBA say they believe a recession here is unlikely with household balance sheets in such good shape and unemployment so low.

The past week saw some interesting political jostling too, ahead of the Federal Government’s upcoming Jobs and Skills Summit.

Treasurer Jim Chalmers distanced himself from the Australian Council of Trade Unions on issues such as its proposal to ditch the stage 3 tax cuts due in 2024, while Nationals leader David Littleproud announced he will attend the event even though Coalition leader Peter Dutton won’t.

AMP has told Australians to brace for steeper declines in home prices over the next 6-9 months – their base case is 20% off previous highs.

However, apartments may outperform houses, as Mirvac warns that a huge shortage is developing due to stalled construction, and by 2024 apartment supply on the east coast will be just 40% of what it was in 2018.

The beleaguered commercial property sector took another body blow when office occupancy went backwards in July thanks to Omicron and the flu, falling as low as 38% in Melbourne.

The Property Council said the figures were “shameful” and called for urgent action, but a new survey by the Australian HR Institute shows many employers are now giving up on trying to entice workers back to the office, with more than 40% of companies no longer expecting staff to ever make an appearance.

Sources:

• Creditor Watch, External administrations surge as cheap money dries up; Court actions up 54% YoY
• Australian Financial Review, US producer prices fall for first time since early in pandemic
• ABC News, CBA increases profit to $9.7 billion, says most customers can cope with rising interest rates
• Sydney Morning Hearld, ‘Extraordinarily unlikely’: ANZ boss hoses down fears of a recession
• Financial Review, Chalmers pours cold water on ACTU demands
• Sky News, Littleproud taking ‘sensible approach’ to Jobs and Skills Summit
• Macrobusiness, Property Council cries as working from home takes over
• aap.com.au, Omicron wave sends office return backwards