Thursday, August 21, 2014

Australian Equities Market

THIS MORNING

In Australia, no major economic data is scheduled. In China the "flash" manufacturing gauge is released. In the US, weekly data on claims for unemployment insurance are released together with existing home sales, the leading index and Philadelphia Federal Reserve index.

OVERNIGHT MARKETS

US Equities

US sharemarkets rose on Wednesday after minutes from the Federal Reserve confirmed policymakers were in no rush to raise interest rates. The Dow Jones index rose by almost 60 points or 0.4 per cent with the S&P 500 index up by 0.3 per cent while the Nasdaq fell by 1 point or less than 0.1 per cent from 14-year highs.

US treasury prices were lower on Wednesday (yields higher) as comments from Federal Reserve policymakers suggested that they were moving closer to lifting rates. US two-year yields rose by 3 points to 0.476 per cent while US 10-year yields rose 2 points to 2.43 per cent.

The euro and the Japanese yen ended weaker against the US dollar after European and US sessions on Wednesday. The euro eased from highs near $US1.3305 to about $US1.3255, ending US trade near the lows. The Australian dollar eased from highs near US93.15c to US92.75c before ending the US session close to US92.85c. And the Japanese yen eased from 103.10 yen per US dollar to JPY103.83, ending US trade near the weakest levels.

World oil prices rose on Wednesday. Data in the last week showed that US crude stocks fell by 4.5 million barrels, led by distillate inventories. Brent crude rose by US72 cents to $US102.28 a barrel and the US Nymex price rebounded by $US1.59 a barrel or 1.7 per cent to $US96.07 a barrel.

Base metal prices rose by up to 2.6 per cent on Wednesday with zinc up the most although tin edged only 0.1 per cent higher. Gold prices fell again on Wednesday as the US dollar rose with the Comex gold futures quote down by $US1.50 or 0.1 per cent to $US1,295.20 per ounce. Iron ore fell by US70c on Wednesday to $US92.30 a tonne.

YESTERDAY'S MARKET

Local Markets Update.

This news story is reprinted from www.businessspectator.com.au

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All Eyes on Hints Of Rates Cut

The Reserve Bank Governor’s appearance in Brisbane today before a group of federal MPs will shed light on the prospect for ¬another cut in interest rates in the wake of last month’s shock rise in unemployment.

Release of minutes from the Reserve Bank Board’s August meeting yesterday, which detailed its decision to leave official interest rates on hold at 2.5 per cent, predated news Australia’s unemployment had jumped to 6.4 per cent.

This news story is reprinted from www.theaustralian.com.au

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Economy Needs More Than Just Low Interest Rates

THE government’s budget is “not that tough” according to Reserve Bank governor Glenn Stevens in testimony today, who suggested lower interest rates were not the answer to lacklustre confidence and weak growth.

Mr Stevens told the House Economics Committee in Brisbane that the government’s budget was not “draconian” and “not that tough”, arguing that subdued consumer confidence and the anticipated slump in resource investment were weighing on Australia’s economic growth.

Mr Stevens said Australia’s fiscal problem “wasn’t catastrophic” now but the budget would require corrective action in the medium-term.

“We as a community have decided to do costly and good things but we haven’t taken the decisions to secure the funding,” he said.

While Mr Stevens said the RBA “hadn’t thought about raising rates recently”, he seemed to rule out lowering them, which helped to push the Australian dollar slightly higher to US93.1c by the end of his three hour semi-annual testimony.

“I’ve allowed the horse to come to the water of cheap funding, but I can’t make it drink,” the governor said.

“I don’t think interest rates are the answer at the moment,” he said, under questioning from MPs about what could be done to curb rising unemployment.

“The thing that is most needed now is something monetary policy can’t directly cause: more of the sort of ‘animal spirits’ needed to support an expansion of the stock of existing assets (outside the mining sector), not just a repricing of existing assets,” Mr Stevens said.

Mr Stevens said the latest unemployment rate of 6.4 per cent was “clearly weak” but highlighted that negative real wage growth was keeping people in work.

The governor once again said the Australian dollar was unusually high but not enough to justify intervention, which entailed require swapping Australians assets that generate a positive return for taxpayers with foreign assets that generated almost nothing.

“Perhaps the most remarkable feature of the international scene at present is the exceptionally low volatility of financial prices — the lowest observed over the past 25 years for sovereign bonds, equities and foreign exchange,” he said in his opening remarks.

“It is not as though there has been a dearth of geopolitical or financial events which might ordinarily trigger more caution among investors. But compensation for risk on financial instruments remains scant,” he added.

“The fall-off in investment spending by resources companies has a long way to go yet and will probably accelerate in the coming year,” he cautioned, suggesting GDP growth would be around 2 to 3 per cent this year — a little below trend.

The RBA has kept interest rates at a record low of 2.5 per cent for more than one year now to help stimulate the non-resource parts of the economy as the construction phase of the resource boom ends and the less labour-intensive export phase gets under way.

“The board has been mindful of allowing time for measures already taken to have their effects, and of the very considerable limitations for monetary policy in fine-tuning economic outcomes over short periods. It has also seen some value, in the present circumstances, in maintaining a sense of steadiness and stability,” he said in his opening statement.

This news story is reprinted from www.theaustralian.com.au

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Swan Misled On Mining Tax: Ferguson

Former Labor treasurer Wayne Swan misled his party and ambushed the mining industry over his proposed mining tax, a former Labor resources minister says.

Former minister Martin Ferguson accused Mr Swan of empty promises of industry consultation over the tax which was integral to the removal of former prime minister Kevin Rudd.

Mr Swan never intended to consult the industry on the tax, he said.

"I felt like resigning, especially when I got the companies in and saw their reaction. It was one of disbelief," he said about the moment he saw the policy.

His account of the saga is detailed in 'Triumph and Demise', which is to be released by Prime Minister Tony Abbott next week, News Corp Australia reports.

Mr Swan rejects the allegations saying he consulted with the industry in April 2010.

This news story is reprinted from www.theaustralian.com.au

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Wednesday, August 20, 2014

Australian Equities Market

THIS MORNING

In Australia, the Reserve Bank Governor gives testimony to the House of Representatives Economics committee. In the US, weekly mortgage finance data is released with the minutes of the last Federal Reserve meeting.

OVERNIGHT MARKETS

US Equities

US sharemarkets rose on Tuesday. A lift in housing starts boosted housing-dependent stocks. And shares in Home Depot soared by 5.6 per cent in response to its earnings result, in turn serving to lift shares in the consumer discretionary sector. Shares in Apple rose 1.4 per cent to $100.53 a share. The Dow Jones index rose by almost 81 points or 0.5 per cent with the S&P 500 index up by 0.5 per cent while the Nasdaq gained 19 points or 0.4 per cent to fresh 14-year highs.

US treasury prices were little changed on Tuesday. While economic data was positive and sharemarkets were in favour, investors were cautious ahead of a speech by the Federal Reserve chair on Friday. US 2-year yields were flat at 0.43 per cent while US 10-year yields were flat at 2.40 per cent.

Major currencies ended weaker against the US dollar after European and US sessions on Tuesday. The euro eased from highs near $US1.3360 to around $US1.3310, before ending US trade near $US1.3320. The Australian dollar eased from highs near US93.40c to US93.00c before ending the US session close to US93.05c. And the Japanese yen eased from 102.53 yen per US dollar to JPY102.90, ending US trade near the weakest levels.

World oil prices fell to 14-month lows on Tuesday. The US dollar rose, making commodities more expensive for buyers in Asia and Europe. And world supplies of crude remain plentiful despite a number of geopolitical risks. Brent crude fell by US4 cents to $US101.56 a barrel and the US Nymex price eased by $US1.93 a barrel or 2.0 per cent to $US94.48 a barrel.

Base metal prices rose by up to 1.1 per cent on Tuesday with lead and zinc up the most. But copper lost 0.6 per cent and tin fell by 0.1 per cent. Gold prices fell again on Tuesday as the US dollar rose with the Comex gold futures quote down by $US2.60 or 0.2 per cent to $US1,296.70 per ounce. Iron ore fell by US30c on Tuesday to $US93.00 a tonne.

This news story is reprinted from www.businessspectator.com.au

Read more details on Australian Stock Market