Sat
Nov
7
The Raw Prawn
Bits and pieces that don't quite justify a post over on the Stubborn Mule. Since you can't post comments here, if you have any feedback, send me a message on twitter seancarmody.
Mon
Nov
2
Review of the markets for the week ending 30 October 2009
This week Inflation figures confirmed the case for an Australian rate rise. Meanwhile, both credit and equity markets were weak around the globe.
Economic data
Australian headline inflation for the September quarter came in very close to forecasts at 1%. Falling transportation and financial services prices in prior quarters mean that the headline inflation rate year on year is now down to 1.3%, but the Reserve Bank’s preferred measure, the trimmed mean, is still up at 3.2%, outside the bank’s 2-3% inflation target.
The US S&P/Case-Shiller house price index rose 1.2% in August, bringing the 12 month price change to -11.3%. While this was a little better than the market expected, September new home sales were released later in the week and, at 402,000, were almost 10% lower than forecasts.
Perhaps the biggest surprise of the week was US GDP which grew 3.5% in the September quarter, better than the expected 3.2% growth. The optimism this generated was dented on Friday by the 0.5% fall in consumer spending in September.
Rates
Interest rates at the very short end of the curve were up, pricing in upcoming cash rate hikes, but beyond six months, the market is becoming less bearish about the extent of future rate rises. The market-implied cash rate 12 months out closed 0.23% lower than it was a week ago.
Two-year government bonds rallied 0.23% and 10‑years rallied 0.16%, steepening the 3‑10 futures curve 11 basis points.
It was a volatile week for US rates and Treasury yields finished the week 0.11% lower.
Credit
As credit markets took their cue from weak equity markets, spreads widened. The CDX investment grade index was 9 basis points wider and high yield 63 basis points, while the euro investment iTraxx was 5 basis points wider. The Australian iTraxx index was unchanged on the week, but is likely to catch up with some widening following offshore weakness on Friday after the Australian close.
There was no new bond issuance in the domestic market.
Other markets
The US dollar staged something of a recovery, gaining 1.9% against the euro. The Australian dollar finished the week at US$0.915, a fall of 1.1%.
Oil prices showed some weakness mid-week, but finished almost unchanged. The WTI crude oil price fell back just below US$80 per barrel. The price of gold was down 1.4% to US$1,045/oz and the broad CRB index was stable.
Equity markets were down and the Australian market fared worse than most. The S&P/ASX 200 slipped 4.3%, while the S&P 500 fell 4%. The Nikkei 225 was down 2.4% and the UK’s FTSE 100 fell 3.8%.
The week ahead
As is traditional, the Reserve Bank has its November meeting on Melbourne Cup Day this Tuesday. Consensus is still for a 0.25% rate rise, although some view 0.50% as a possibility. The next day retail sales and building approvals figures are out.
The Fed also has a rate decision this week, but unlike in Australia, no-one expects to see a change in US rates.
Posted via web from Market View | Comment »
Mon
Oct
26
Review of the markets for the week ending 23 October 2009
Australian interest rates rose for another week as the economy shows less and less resemblance to the US, UK and Europe. Equity markets around the world were volatile.
Economic data
The release of the October board minutes showed that the Reserve Bank’s rate hike earlier in the month had been the subject of extensive deliberation. While global economic prospects remain uncertain, the influence of “developments in Asia” ultimately tilted the argument in favour of a rate rise.
The Westpac Leading Index for August was up 1.1% for the month, bringing the annual growth rate to 1.7%, not too far below the long-term trend of 2.8%.
US housing starts were up 5% in September at 590,000, although this was slightly weaker than expected. Building permits also fell below forecasts, falling 1.2% to 573,000.
The US Fed Beige book noted “stabilisation or modest improvements” across the 12 Fed districts, but also pointed to weakness in the commercial real estate sector. The US leading indicators index was up 1% for September, narrowly beating expectations of 0.8%.
Following a meeting of European finance ministers, ECB President Jean-Claude Trichet warned of the dangers of exchange rate volatility, but said that he took seriously the US commitment to a strong dollar. Growth in the UK continues to look grim as GDP fell 0.4% for the September quarter, bringing the annual GDP change to -5.2%, well below forecasts for an annual fall of 4.6%.
Rates
The front end of the Australian curve rallied a little on a reduction in the estimated likelihood of a 50 basis point rate hike in November. Further out, the curve rates rose. Two-year government bond yields were up 0.11% and 10-year yields up 0.12%. The mid-part of the curve did not sell off as far, and the 3‑10 year futures curve steepened 5 basis points.
US long-end rates rose almost 0.1%, but the implied pricing of the Fed funds rate fell another 0.10%.
Credit
There was some weakness in credit markets over the week and the Australian iTraxx widened 3 basis points. AAA bonds were weaker, but BBB bonds managed to tighten around 9 basis points relative to Commonwealth government debt.
US and European credit indices had a quiet week.
The bond primary market saw the launch of a Downer EDI 4 year bond. Slated for $100 million, the BBB bond issue was then increased to $150 million and priced at 3.75% over swap.
Other markets
The momentum of the Australian dollar slowed a little, but it still managed a rise of 0.4% against the US dollar, finishing the week at US$0.925.
Oil prices rose again. The West Texas Intermediate (WTI) crude oil price finished the week over US$80, up 1.9%.
Share market performance continued to be a little rocky. The Australian S&P/ASX 200 was up 0.5% and the US S&P 500 was down 0.7%.
The week ahead
The Australian inflation figures released on Wednesday will be important for the Reserve Bank in determining monetary policy next month.
Further housing data is out in the US with the release of existing home sales figures and the S&P/Case Shiller house price index.
Posted via web from Market View | Comment »
Fri
Oct
23
Mainstream Media Exposure
In today’s Sydney Morning Herald Richard Ackland had a piece about asylum seekers with a reference to the Stubborn Mule. I may be a new media aficionado, but it was still a very pleasant surprise.
Tue
Oct
20
Review of the markets for the week ending 16 October 2009
The Reserve Bank governor continues to convince the market that cash rates are heading higher. Meanwhile equity markets continue to rise. Oil prices were also up.
Economic dataWhile Tuesday’s NAB business confidence index declined 4 points, Wednesday’s Westpac-Melbourne Institute consumer confidence release saw the index rose 1.7%, reaching its highest level in over two years.
Reserve Bank Governor Glenn Stevens gave a speech in Perth on Thursday. Hawkish comments such as “interest rates need to be adjusted to a more normal setting” combined with the strength of consumer confidence the day before, led markets to price in a high probability of a 0.5% rate hike in November.
The October reading of the Investors Business Daily consumer confidence index was down 3.8% on the previous month. Retail sales fell 1.5% in September and, while this was somewhat better than forecasts for a 2.1% fall, the decline largely reversed the growth in sales in August.
US CPI for September was exactly in line with expectations, rising 0.2%, compared with 0.4% the month before. This brings the inflation rate for the year to -1.3%. Inflation excluding food and energy was also 0.2% for the month, but the rate for the year is positive at 1.5%. Industrial production for September rose 0.7%, beating expectations of a 0.2% rise. Since the “cash for clunkers” program was almost certainly a factor driving this figure, production may fall back in October.
Rates
Following Stevens’ comments, the market is now pricing in a cash rate of 5.38% in 12 months’ time, up 0.35% from the week before and up 0.78% from a month ago. The 3‑10 futures curve steepened 6.5 basis points. Two‑year government yields rose 0.29% and 10‑year yields rose 0.36%.
US short-end rates rallied in response to the weak economic data. The market is now implying a Fed funds rate 12 months from now of less than 1%, a fall of 0.43% over the week.
Credit
Credit performed well over the week. The Australian iTraxx (series 12) rallied 11 basis points, while AAA-rated bonds spreads were largely unchanged and BBB‑rated bonds rallied an average of 11 basis points.
US CDX high-yield tightened 33 basis points. US CDX and euro iTraxx investment‑grade were both in 4 basis points.
Unlike recent weeks, the primary bond market was rather quiet, but an auto asset-backed deal was brought to market.
Other markets
The US dollar continued its decline, falling against all major currencies other than the Japanese yen. The Australian dollar finished the week up 0.71% at US$0.921.
Gold traded up and down in a 2% range, but finished the week unchanged at US$1,049/oz. Oil prices were very strong and the WTI crude oil spot price was up 9.4%.
US equities wobbled mid-week, but the S&P 500 managed to close up 1.9% despite falls on Friday. Australia’s S&P/ASX 200 was up 1.8%. The Nikkei 225 was up 2.4%. European markets were weaker and the UK’s FTSE 100 was only up 0.5% for the week.
The week ahead
The October minutes of the Reserve Bank board meeting are out and they will be closely scrutinised for hawkish sentiment. The Westpac leading index data for August is released on Tuesday, as is new motor vehicle sales data for September.
US housing starts for September will be released on Tuesday and the FHFA monthly house price index is out on Friday. The Federal Reserve will also be publishing its “Beige Book” commentary on economic conditions.
Posted via web from Market View | Comment »
Mon
Oct
19
Excellent @Pollytics post about "push vs.pull" for asylum-seeker numbers
An excellent piece of analysis showing that the number of asylum-seekers arriving in Australia is dominated by the “push” factors of conflict around the world, not domestic “tough stance” policies.
Sat
Oct
17
And now asylum-seeker league table ranked by economy size
I suppose it was inevitable that I would be asked to follow up the asylum-seekers per capita league table with a ranking by Gross Domestic product, so here it is.
Fri
Oct
16
Climate change and warfare correlation chart from The Economist #charts #climatechange
via economist.com
Increasing temperatures used to be negatively correlated with temperature: people fought less when it was warm. More recently it’s the other way around (just).
Don’t like the inverted scale and the lack of negative signs.
Posted via web from Stubborn Mule | Comment »
Wed
Oct
14
New Zealand has the best universities money can buy
Yesterday I concluded that Switzerland has the best universities in the world, after tweaking the results of the Times Higher Education university league table by accounting for population. I also claimed I would not get carried away and analyse the data any further, but @TheJamesGlover requested a ranking adjusting for the wealth of each country, as measured in terms of Gross Domestic Product (GDP). I relented and this chart is the result and it has New Zealand pushing Switzerland down into second place. Make of that what you will.
