Offshore markets remained relatively flat overnight with no headline data released in the US and although a positive result in Germany’s current account (euro 19.3bn up from 14.7 billion) most investors sat on the sidelines awaiting the Greek bail out outcome.
Domestically markets began to digest the shock of the RBA leaving rates on hold for February. As the Aussie dollar rallied, bonds continued to slide with the 10 year implied bond yields around 4% and the 3 years around 3.5%.
If the US continues to post positive data and Europe moves forward in its debt recovery plans perhaps the RBA has done enough in this cycle to remain balanced in its economic position. Worth noting is the Board remains vigilant to react to offshore conditions.
February 09, 2012
February 08, 2012
RBA Board in holding pattern - cash rate unchanged 4.25%
The Reserve Bank of Australia has deemed its monetary policy settings adequate in dealing with the economic environment domestically and the current global financial situation.
Although aware of the “…acute financial pressures on banks in Europe…” recent data out of the US and China has proven positive suggesting the slowdown mid 2011 maybe in correction mode. Coupled with the recent easing in CPI pressures domestically and the previous two rate cuts “…the Board noted that interest rates for borrowers have declined to be close to their medium-term average...”
On this basis the RBA is content with the prospect of reacting to events as opposed to pre-empting them both on shore and offshore. They have left the door open however for further easings “…Should demand conditions weaken materially…”
Although aware of the “…acute financial pressures on banks in Europe…” recent data out of the US and China has proven positive suggesting the slowdown mid 2011 maybe in correction mode. Coupled with the recent easing in CPI pressures domestically and the previous two rate cuts “…the Board noted that interest rates for borrowers have declined to be close to their medium-term average...”
On this basis the RBA is content with the prospect of reacting to events as opposed to pre-empting them both on shore and offshore. They have left the door open however for further easings “…Should demand conditions weaken materially…”
February 07, 2012
RBA Board meeting today at 2.30pm
The Reserve Bank Of Australia meets this morning for the first time this year yo deliberate the state of the economy and determine the cash rate for the Australian household and business sector for the coming month.
The markets have priced in about a 75-80%% chance of a 25 basis points cut this morning based on the following factors;
* Australia's dual-speed economy illustrates a strong mining sector on the one hand offset by weak manufacturing and retail sectors (the worst figures recorded for Dec in 28 years yesterday).
* With unemployment flat over the last six months the economy's growth potential has been revised down and CPI is now trending towards the lower end of the RBA's 2-3% target band.
* Although the US is showing early signs of recovery Europe remains in a protracted state of disharmony.
We feel the easing is necessary and the question of either a 25 or 50 basis point reduction in the cash rate will be based on the spread of data available to the Board.
In news overseas the Greek debt solution remains ongoing causing concern amongst the collective EU Region, in particular Germany and France. Both political leaders of the two nations have called for a swift resolution to the discussions taking place.
In data this evening German industrial Production will be a significant release ahead of the key US testimony to Congress.
The markets have priced in about a 75-80%% chance of a 25 basis points cut this morning based on the following factors;
* Australia's dual-speed economy illustrates a strong mining sector on the one hand offset by weak manufacturing and retail sectors (the worst figures recorded for Dec in 28 years yesterday).
* With unemployment flat over the last six months the economy's growth potential has been revised down and CPI is now trending towards the lower end of the RBA's 2-3% target band.
* Although the US is showing early signs of recovery Europe remains in a protracted state of disharmony.
We feel the easing is necessary and the question of either a 25 or 50 basis point reduction in the cash rate will be based on the spread of data available to the Board.
In news overseas the Greek debt solution remains ongoing causing concern amongst the collective EU Region, in particular Germany and France. Both political leaders of the two nations have called for a swift resolution to the discussions taking place.
In data this evening German industrial Production will be a significant release ahead of the key US testimony to Congress.
February 06, 2012
Global markets react strongly to US job growth
A better than expected outcome in US Non-Farm Payrolls data on Friday has spurred markets across the board into rally mode. Unemployment fell to the lowest level recorded in three years to 8.3% and provided a strong signal the US economy was fighting its way out of contraction. Coupled with signs of progress out of Greece investors pushed risk assets higher and postulated doubt over the possibility long term bond yields would remain low for an extended period of time.
Locally the Australian dollar performed well however with all eyes on the RBA board meeting tomorrow we may see some profit taking late in the afternoon session. Consensus dictates a 25 basis point cut is imminent however the cautions the FOMC and ECB have publically announced in their recent board meetings might mean a decisive 50 point cut helps to ease any future tensions which Australia might be in for as result of further global contraction.
Locally the Australian dollar performed well however with all eyes on the RBA board meeting tomorrow we may see some profit taking late in the afternoon session. Consensus dictates a 25 basis point cut is imminent however the cautions the FOMC and ECB have publically announced in their recent board meetings might mean a decisive 50 point cut helps to ease any future tensions which Australia might be in for as result of further global contraction.
February 03, 2012
Markets bide their time…
Still no deal in Greece as creditors await the joint verdicts from the EU, IMF and ECB as the countries long term debt sustainability outcomes before any firm pact is made.
Investors downplayed the ongoing stalemate preferring to sit on the sidelines ahead of tonight’s all important US Non-farm Payrolls release. The recent positive data in the manufacturing sector was slightly offset by the production sector hence this figure provides a key piece of economic growth puzzle.
Investors downplayed the ongoing stalemate preferring to sit on the sidelines ahead of tonight’s all important US Non-farm Payrolls release. The recent positive data in the manufacturing sector was slightly offset by the production sector hence this figure provides a key piece of economic growth puzzle.
February 02, 2012
Manufacturing boosts market confidence
Key manufacturing data in the US, Europe and China lifted markets across the board overnight. Stocks commodities and risk currencies all proved beneficiaries of the growth in the US Institute for Supply Management numbers posted on Wednesday. A rise to 54.1 indicated the strength in the US manufacturing sector lead by construction.
German growth also proved positive territory for the first time since September and UK manufacturing data grew for the first time in 3 months.
German growth also proved positive territory for the first time since September and UK manufacturing data grew for the first time in 3 months.
February 01, 2012
Softer US economic data sways investor confidence
US consumer confidence suffered an unexpected fall as households bore the brunt of higher gas prices and weaker job opportunities over the winter. A glitch in the positive data flow out of the US enabled investors to take profit as stocks and commodities edged lower overnight.
In Europe no news on the Greek debt resolution caused further investor angst as the March deadline approaches to refinance bonds. A protracted delay could see more ammunition for financial market swings over coming days.
In Europe no news on the Greek debt resolution caused further investor angst as the March deadline approaches to refinance bonds. A protracted delay could see more ammunition for financial market swings over coming days.
January 31, 2012
Greece dampens investor enthusiasm
A delay overnight in announcing a solution between Greek creditors and the Government was a disappointment for investors as the market anticipated a resolution to be fast approaching. The stalemate was touched on by German Chancellor Angela Merkel in talks last night revealing the banks had not committed to any deal. Plans to appoint a commissioner to expedite a swift resolution were quashed by Greek finance minister Venizelos.
Locally we have business data released for December detailing confidence and condition expectations. Also private sector credit data will provide a little insight into how the “cautious consumer “ is coping with the current evolving conditions.
Locally we have business data released for December detailing confidence and condition expectations. Also private sector credit data will provide a little insight into how the “cautious consumer “ is coping with the current evolving conditions.
January 30, 2012
Hiccup in US Econony growth
Economists were expecting the US economy to report annualised growth in Q4 around 3.0% however 2.8%, up from 1.8% was still slightly disappointing news. Consumer spending looked better growing 2.0% hence markets were marginally moved.
In Europe sources revealed a solution was closer to finalisation on the impending debt resolution for Greece's refinancing issues.
In Europe sources revealed a solution was closer to finalisation on the impending debt resolution for Greece's refinancing issues.
January 27, 2012
US FOMC commits to low interest rates until 2014
Global risk markets were the beneficiary on Thursday as the Fed committed to bolstering economic growth by extending their initial horizon of low interest rates by 18 months. Their pledge ensures rates will remain low until late 2014 indicating a protracted 3 year recovery is now expected.
Stocks, commodities, risk currencies all rose on the news with our Australian dollar hitting a 3 month high of 106.86 and the Euro showing strength. Data out of Europe was not all bad either as Italy was able to issue bonds at lower borrowing levels than last year’s auction. Greece is also committed to an agreement with its private creditors to ensure they receive the IMF bailout package ahead of the March maturity of 14.5 billion euros in debt.
Stocks, commodities, risk currencies all rose on the news with our Australian dollar hitting a 3 month high of 106.86 and the Euro showing strength. Data out of Europe was not all bad either as Italy was able to issue bonds at lower borrowing levels than last year’s auction. Greece is also committed to an agreement with its private creditors to ensure they receive the IMF bailout package ahead of the March maturity of 14.5 billion euros in debt.
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