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The Experts

James
Craig James
Economy Expert
+ About Craig James
About Craig James

Craig James is CommSec’s Chief Economist.

On leaving school Craig James joined the (then) Rural Bank, whilst undertaking university studies. He received his Bachelor of Commerce (Economics) at University of NSW in 1984 and then a Master of Commerce (Economics) at the same university in 1988.

He remained at the Rural Bank, which became the State Bank over time and then Colonial, working in branches, Corporate, Planning and Economic Research.

He became chief economist of Colonial Group in September 1987, before becoming chief economist at CommSec in August 2000 with the Commonwealth takeover of Colonial.

In 2002 Craig had a sea-change, joining the Australian Financial Review. He had always wanted to pursue a role in journalism and enjoyed the role as an economic commentator and analysts, finding that he could pursue a journalistic-type role as well as doing more electronic media work at CommSec and rejoined the group in 2003.

On taking the reigns of chief economist at Colonial, Craig endeavoured to style their research in a “user-friendly” way – something that set their research apart and still does today. The approach has been successful in their media work and in promoting Colonial, and then CommSec, to the general public. CommSec is the most quoted economic group in the mainstream media.

CommSec economic reports are a bit different in that they devise tools such as the ‘Mums and Dads’ share index and the iPod index, and undertake research on the weather and demographic changes to show how they affect the economy.

Craig currently does around 2-3 regular TV crosses a day, ad hoc radio and newspaper interviews and writes regular commentaries as well as presenting to staff, clients and external organisations.

Outside work, Craig's main interests are athletics (cross country in winter), weight training, reading widely across a range of newspapers, magazines and electronic media, and trying to keep up with the children.

Wind down to Christmas begins…

Friday, December 14, 2018

On Monday. the Australian Bureau of Statistics (ABS) releases the Overseas Arrivals & Departures publication – timely considering so many people jet off for holidays at this time of year.

The Federal Government will also hand down its Mid-Year Review on Monday

On Tuesday, the Reserve Bank releases the minutes of the last Board meeting. No new insights are expected. And on the same day, ANZ and Roy Morgan release the weekly consumer confidence data.

On Thursday, the ABS releases the June quarter population estimates together with the November labour market data. Annual population growth probably held near 1.5% – one of the fastest rates across advanced nations. Meanwhile probably near 20,000 jobs were created in November, leaving the jobless rate near a 6-year low of 5%. Also on ThursdayCommonwealth Bank releases its Business Sales Indicator.

 On Friday, the ABS releases yet more jobs data – this time the more detailed estimates for November, including the figures on employment by industry.

Looking further out, the Reserve Bank releases the Private Sector Credit data on New Year’s EveOn Wednesday January 2, CoreLogic will release December data on home prices. The CBA manufacturing purchasing manager’s index is released also on January 2 with the services gauge on January 4.

Overseas: Fed rate decision in focus

There is no shortage of economic data and events in the US and China over the next three weeks.

In China, the highlights areHouse prices (December 15); Industrial profits (December 27); the ‘official’ manufacturing and services purchasing managers indexes (December 31); Caixin manufacturing (January 2); Caixin services (January 4).

 In the US on Monday (December 17), the influential Empire State manufacturing index is released with the NAHB housing market index and capital flows data.

On Tuesday, the housing starts and building permits data are issued with weekly chain store sale

The US Federal Reserve Open Market Committee meet over Tuesday and Wednesday with the decision announced on Thursday morning Sydney time at 6am. While a rate hike is likely, it is by no means assured. More Federal Reserve officials have indicated that the federal funds rate is near “neutral”.

On Thursday, data on existing home sales is issued with the weekly data on unemployment insurance claims.

And then there is Super Friday’It appears that all data issuers want to clear the decks before Christmas and the end of the year. Included on Friday December 21: Economic growth (GDP); Personal income & spending; Durable goods orders; Chicago Federal Reserve national activity index; Philadelphia Federal Reserve manufacturing index; S&P/Case Shiller home price index; Consumer sentiment; Leading index; and the Kansas Federal Reserve manufacturing index.

The following week, on Thursday December 27, FHFA home prices, new home sales, consumer confidence and the Richmond Federal Reserve index are released with weekly data on unemployment insurance claims. While on Friday, the goods trade balance is issued with the Chicago purchasing manager’s index.

The New Year datafest begins on Thursday January 3, with the ISM manufacturing index released with construction spending, ADP employment, Challenger job cuts and new vehicle sales. The US economy continues to perform well. At 59.3, the ISM index is well above the 50 reading that separates expansion from contraction. In November new vehicle sales were the second highest recorded in the past year.

And on Friday January 4, the ISM services index is released with the non-farm payrolls (employment) data, ADP employment and Challenger job cuts. Just like the manufacturing gauge, the services index indicates solid activity given the reading stands at 60.7. The jobless rate remains at a 49-year low of 3.7% but annual wage growth is still relatively modest at 3.1%.

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Good morning, Australia!

Monday, December 10, 2018

Hello, world!

Global oil prices rose on Friday after OPEC oil ministers and Russia agreed to cut output by 1.2 million barrels per day (bpd). OPEC will curb output by 800,000 bpd from January while non-OPEC allies contribute an additional 400,000 bpd of cuts. The number of oil rigs in operation in the US fell by 10 in the latest week, the most in two years. Brent crude rose by US$1.61 or 2.7% to US$61.67 a barrel and the US Nymex price rose by US$1.12 or 2.2% to US$52.61 a barrel. Over the week Brent rose by US$2.96 or 5% with Nymex up US$1.68 or 3.3%.

Major currencies were mixed against the US dollar in US and European trade compared with the Asia close. The Euro rose from US$1.1360 to US$1.1420 and was near US$1.1375 in late US trade. The Aussie dollar eased from near US72.40 cents to around US71.95 cents and was near US72.00 cents in late US trade (currently US71.8c). And the Japanese yen lifted from 112.93 yen per US dollar to JPY112.54 and was near JPY112.70 in late US trade.

Howd’y, USA!

In US economic data, non-farm payrolls (employment) rose by 155,000 in November after a downwardly-revised gain of 237,000 in October (forecast +205,000). The jobless rate was steady at 3.7%. Average earnings rose by 0.2% (forecast +0.3%) with annual growth unchanged as forecast at 3.1%. Consumer sentiment steady at 97.5 in December (forecast 97).  US share markets recorded broad-based declines on Friday with key indexes down 2-3%. Concerns over the US-China trade dispute continue to linger. The Dow Jones lost 559 points or 2.2%. The S&P500 index was lower by 2.3% and the Nasdaq index was lower by 219 points or 3.1%. Over the week the Dow lost 4.5%, the S&P 500 fell by 4.6% and the Nasdaq lost 4.9%. US treasury bond prices rose on Friday (yields lower) after jobs data fell short of forecasts. Investors favoured bonds over equities on US-China trade concerns. US 2-year yields fell by 5 points to 2.72% and US 10-year yields fell by 4 points to 2.86%. Over the week, US 2-year yields fell by 11.5 points and US 10-year yields fell by 12.5 points.

Zǎoshang hǎo, Asia

China November data: consumer prices +2.2% over year (forecast +2.4%). Producer prices +2.7% as expected. Exports +5.4% over year (forecast +10%). Imports +3% (forecast +14.5%). Trade surplus US$44.7bn (forecast +US$34bn) 

Bonjour, Europe

European share markets were generally higher on Friday. The oil & gas index rose 2.2% but the trade-sensitive autos sector fell 0.2%  The pan-European STOXX600 index rose by 0.6% and the UK FTSE rose by 1.1% but the German Dax index lost 0.2%. In London trade, shares of Rio Tinto up 2% with BHP up by 2.5%.

Top of the morning, London

Base metal prices were higher by up to 1.1% on the London Metal Exchange on Friday with copper up the most. But zinc fell by 1.0%. Over the week metals were mixed with tin up 3.4% and nickel down by 2.6%. The gold futures price rose by US$9.00 an ounce or 0.1% to $1,252.60 an ounce. The spot gold price was trading near US$1,248 an ounce in late US tradeOn the week gold rose by US$26.60 or 2.2%. Iron ore rose by US85 cents or 1.3% to US$66.95 a tonne. On the week iron ore rose US$1.50 or 2.3%.

G’day, Australia

In Australia, housing finance data is released. Reserve Bank assistant Governor Christopher Kent delivers a speech. In the US, the JOLTS job openings series is released.

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Good morning, Australia!

Monday, December 03, 2018

China and the US have agreed to halt additional tariffs in the hope of securing a broad trade agreement within 90 days. The White House said China will buy a "very substantial" amount of agricultural, energy, industrial and other products. US and China will begin negotiations on issues such as technology transfer, services and agriculture. If the two countries are unable to reach an agreement in 90 days, the 10% tariffs will be raised to 25%. 

How’dy USA!

In US economic data, the Chicago purchasing managers index rose from 58.4 to 66.4 in November (forecast 58).

US share markets ended firmer on Friday. Investors awaited the result of US-China trade talks. The energy sector eased but airlines rose in response to weaker oil prices. Shares in General Electric fell 5.5% on reports of a federal investigation. The Dow Jones rose by almost 200 points or 0.8%. The S&P500 index rose by 0.8% and the Nasdaq index gained 57.5 points or 0.8%. Over the week the Dow rose 5.1%, S&P 500 rose by 4.8% and the Nasdaq rose 5.6% - the biggest weekly gain in over seven years. Over the month the Dow rose 1.7%, S&P 500 rose 1.8% and Nasdaq gained 0.3%.   

US treasury bond prices were higher again on Friday (yields lower). Investors favoured equities over safe-haven bonds and gold. US 2-year yields fell by 2 points to 2.80% and US 10-year yields fell by 4 points to near 2.99%. Over the week US 2-year yields fell by 4.5 points and US 10-year yields fell by 6 points.

Major currencies were mixed against the US dollar in US and European trade compared with the Asia close. The Euro eased from US$1.1395 to US$1.1305 and was near US$1.1315 in late US trade. The Aussie dollar held between US72.85 cents and US73.15 cents and was near US73.18 cents in late US trade. And the Japanese yen eased from 113.35 yen per US dollar to near JPY113.65 and was near JPY113.45 in late US trade. This morning, the Euro is US$1.1355; Aussie at US73.75 cents and Japanese yen at JPY113.46.

Global oil prices fell by over 1% on Friday, largely reversing Thursday's gains. Brent crude fell by US80 cents or 1.3% to US$58.71 a barrel and the US Nymex price fell by US52 cents or 1.0% to US$50.93 a barrel. Over the week Brent lost 0.2% and Nymex rose 1.0%.

Bonjour, Europe

European share markets were weaker on Friday ahead of the US-China meeting on trade issues. The pan-European STOXX600 index fell by 0.2%. The German Dax index lost 0.4% and the UK FTSE index fell by 0.8%. In London, trade, shares of Rio Tinto fell by 1.7% and shares in BHP were down by 1.9%.

Top of the morning, London

Base metal prices were firmer by up to 3.4% on the London Metal Exchange on Friday, with zinc up the most but tin lost 0.7% and copper lost 0.3%. Over the week metals were mixed with nickel up 2.6% and tin lost 2.2%. The gold futures price fell by US$4.40 an ounce or 0.4% to $1,226 an ounce. The spot gold price was trading near US$1,222 an ounce in late US trade. Over the week gold rose by US$2.80 or 0.2%. Iron ore fell by US20 cents or 0.3% to US$65.45 a tonne. Over the week, iron ore fell by US$3.45 or 5%.

G’day, Oz

In Australia, data on home prices is released with the purchasing manager indexes, job ads and Business Indicators publication. In the US, data on vehicle sales and construction spending are released with the ISM manufacturing survey.

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Summer signposts for investors

Friday, November 30, 2018

The week kicks off Monday when the Australian Bureau of Statistics (ABS) releases the Business Indicators publication for the September quarter. The data on inventories or stocks is a direct input to Wednesday’s economic growth figures. And the ABS also publishes the building approvals – a key leading indicator for home building. Also both the AiGroup and CommBank release separate survey results on manufacturing activity. And CoreLogic publishes the November results for home prices. Home prices may have fallen by 0.8% in November, with weakness concentrated in Sydney and Melbourne.

Talking Tuesday

The regular weekly reading on consumer confidence is published by ANZ and Roy Morgan. And the ABS publishes quarterly data on government spending and the Balance of Payments – the broader data on the trade position. The Reserve Bank Board meets but no rate change is expected. 

By Wednesday

The ABS releases the National Accounts – containing the key reading of economic growth in the September quarter. The current annual growth rate of 3.4% is well above the 2.75% long-term average. And the Federal Chamber of Automotive Industries issues the November new vehicle sales figures. And both AiGroup and CommBank publish their respective purchasing manager survey results for the services sector. 

It’s Thursday!

The ABS releases the International trade data (data on exports and imports) for October. Retail trade data is also issued, while Reserve Bank Deputy Governor Debelle delivers a speech. 

Beginning of Winter in the US

Ordinarily, the US jobs data would hog the limelight in the first week of December. But financial markets will respond to the US-China trade discussions (November 30-December 1), testimony of the US Federal Reserve chair on Wednesday and the OPEC oil ministers meeting on Thursday. 

Monday kick off

The data week kicks off when the Institute of Supply Management (ISM) issues the manufacturing purchasing managers survey. An equivalent survey is released in China by the private sector, Caixin media group. Also in the US, data on construction spending is released with new vehicle sales data. A modest 0.4% lift in construction spending is tipped for October. And vehicle sales were at an 11-month high in October at a 17.57 million annual rate. Investors will be interested as to whether the upward sales trend continued into November.

Optimistic Tuesday?

The usual weekly data on US chain store sales is released on Tuesday, along with the ISM New York  index and IBD/TIPP economic optimism gauge. 

Big day Wednesday

The Federal Reserve chair, Jerome Powell, will give testimony of the economic outlook before the congressional Joint Economic Committee. Expect more focus on ‘neutral’ interest rates. And the ISM issues the services sector purchasing manager’s survey. Little change is expected on the current index of 60.3 – well above the 50 reading that separates expansion from contraction. Also the regular weekly data on mortgage applications is released also, with the ADP employment survey, productivity & labor cost data and the Federal Reserve Beige Book. And the ADP survey is expected to show that 189,000 private sector jobs were created in November. The Beige Book is a summary of conditions in Federal Reserve districts and is an important signpost ahead of the expected rate hike to be delivered on December 19.

On Thursday

The October data on international trade is issued together with the weekly data on new claims for unemployment insurance, factory orders and the Challenger survey of job cuts. Economists expect little improvement in the trade deficit for October, with a deficit near US$54 billion. Interestingly, the Chinese trade data is scheduled to be released on Saturday (December 8). Inflation data follows on Sunday December 9. 

Out Friday

The non-farm payrolls (employment) data is issued with the jobless rate, hours worked and average earnings data. A 205,000 lift in jobs is expected. And the preliminary December reading of consumer sentiment is issued with consumer credit and wholesale inventories figures.

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Good morning, Australia!

Monday, November 26, 2018

How’dy USA!

In US economic data, the Markit 'flash' manufacturing gauge fell from 55.7 to 55.4 in November (forecast 55.7). The services gauge fell from 54.8 to 54.4 (forecast 54.9).

US share markets were weaker in a shortened trading session on Friday. The energy sector fell by 3.3% in response to a slump in oil prices. The S&P retailing sector fell 0.6% despite reports of long lines at checkouts as buyers embraced Black Friday bargains. At the close the Dow Jones was down by almost 179 points or 0.7%. The S&P500 index was lower by 0.7% and the Nasdaq index was lower by 33 points or 0.5%. Over the week the Dow fell by 4.4% with the S&P 500 index down 3.8% and the Nasdaq fell 4.3%.

US treasury bond prices rose again on Friday (yields lower). Investors to some extent favoured safe-haven assets like bonds over equities. But lower oil prices also pointed to declines in headline inflation rates. US 2-year yields fell by 1 point to 2.816% and US 10-year yields fell 2 points to 3.046%. Over the week US 2-year yields rose by 2 points and US 10-year yields fell by 2 points.

Major currencies were weaker against the US dollar in US and European trade compared with the Asian close. The Euro fell from highs near US$1.1420 to lows near US$1.1320 and was near US$1.1340 in late US trade. And the Japanese yen held between 112.65 yen per US dollar and JPY112.95 and was near the weakest levels in late US trade.

The spot gold price was trading near US$1,222 an ounce in late US trade. Over the week gold fell by US20c. Iron ore fell by US$3.15 or 4.4% to US$68.90 a tonne. Over the week, iron ore fell by US$6.20 or 8.3%.

In the US, the Chicago Federal Reserve national activity index is released with the Dallas Fed manufacturing index.

Global oil prices fell between 6-8% on Friday. While traders expect OPEC oil producers to cut output by 1.4 million barrels per day at a December 6 meeting, they’re less optimistic about the outcome of US-China trade talks. The oil market is estimated in surplus by around 0.5 million barrels per day. Brent crude fell by US$3.80 or 6.1% to US$58.80 a barrel and the US Nymex price fell by US$4.21 or 7.7% to US$50.42 a barrel. Over the week Brent fell by 11.9% and Nymex fell by 10.7% - the largest weekly declines since January 2016.

Guten Morgen, Europe

European share markets were mixed on Friday. The oil and gas index fell 2.9% in response to lower oil prices, but airlines rose. And Italian banks rose 1.3% in response to lower bond yields. Investors digested news that the German economy shrank 0.2% in the September quarter. The pan-European STOXX600 index rose by 0.4% but fell 1.1% over the week. The German Dax index rose by 0.5% on Friday but the UK FTSE index lost 0.1%.

Top of the morning, London

Base metal prices were weaker by up to 2.3% on the London Metal Exchange on Friday with tin down the most. But aluminium rose 0.1%. Over the week metals fell by up to 3.9% with nickel down the most. But aluminium rose 0.9% with copper up 0.2%.

In London trade, shares of Rio Tinto fell by 3.3%. 

The gold futures price fell by US$4.80 an ounce or 0.2% to $1,223.20 an ounce. 

G’day, Australia

The Aussie dollar fell from highs near US72.50 cents to US72.20 cents and was near US72.35 cents in late US trade. In Australia, the RBA Governor is speaking at a Payment summit.

Have a great day, Australia!

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Good morning, Australia!

Monday, November 19, 2018

Howd’y USA

In US economic data, industrial production rose by 0.1% in October (forecast +0.2%). The Kansas City Federal Reserve manufacturing index fell from +24 to +5 in November. There were net capital outflows of US$29.1 billion in September but net capital long-term inflows were US$30.8b (forecast +US$46.2b). 

US share markets were mixed on Friday with technology shares weaker. Shares in Nvidia slumped by 18.8%, after the chipmaker blamed a decline in cryptocurrency mining for a drop in sales. But investors were encouraged by progress in the US-China trade dispute. At the close of trade, the Dow Jones was up by 124 points or 0.5%. The S&P500 index was up by 0.2% but the Nasdaq index lost 11 points or 0.2%. Over the week, the Dow lost 2.2%, the S&P 500 index fell by 1.6% and the Nasdaq lost 2.2%. 

US treasury bond prices rose on Friday (yields fell) on signs that the Federal Reserve was drawing close to a pause in the rate-hiking cycle. In an interview with CNBC, Fed Vice Chair Richard Clarida said the bank needs to be particularly data-dependent as rates are near the 2.5% to 3.5% "neutral" range. US 2-year yields fell by 6 points to 2.81% and US 10-year yields fell 5 points to 3.06%. Over the week, US 2-year yields fell by 8 points and US 10-year yields fell 7 points.  

Major currencies were firmer against the US dollar in US and European trade compared with the Asian close. The Euro rose from lows near US$1.1320 to highs near US$1.1420 and was near the highs in late US trade. The Aussie dollar rose from lows near US72.50 cents to US73.35 cents and ended near the highs in late US trade. And the Japanese yen lifted from 113.45 yen per US dollar to JPY112.65 and was near JPY112.82 in late US trade.

Global oil prices ended flat on Friday as investors debated the future direction for prices. Brent crude rose by US14 cents or 0.2% to US$66.76 a barrel and the US Nymex price was unchanged at US$56.46 a barrel. Over the week Brent fell by 4.9% and Nymex fell by 6.2%.  

Bonjour, Europe

European share markets fell on Friday. Investors were focused on the proposed Brexit deal and wrangling over budget issues between Italy and the European Commission. Shares in French media group Vivendi rose by 3%, after the company posted better-than-expected third-quarter sales. The pan-European STOXX600 index fell by 0.2%. The German Dax index fell by 0.1% and the UK FTSE index lost 0.3%. In London trade, shares of Rio Tinto rose by 2.9% and BHP lifted by 1.1%. 

Top of the morning, London

Base metal prices rose by as much as 3.9% on the London Metal Exchange on Friday with the price of lead up the most. But tin fell by 0.2%. Over the week, zinc rose 3.8% and copper gained 2.4% but nickel lost 1.1% and aluminium fell by 1.3%. 

The gold futures price rose by US$8 an ounce or 0.7% to $1,223 an ounce. The spot gold price was trading near US$1,221 an ounce in late US trade. Over the week gold rose by US$14.40 or 1.2%. Iron ore rose by US95 cents or 1.3% on Friday to US$75.10 a tonne. Over the week, iron ore fell by US$2.15 or 2.8%. 

G’day, Australia!

The CommSec Home Size Trends report is released with the Australian Bureau of Statistics' "Overseas Arrivals & Departures" publication. In the US, the NAHB housing Market index is issued.

Have a great day, Australia!

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A good set of numbers

Friday, November 16, 2018

Employment rose by 32,800 in October, after a revised 7,800 increase in jobs in September (previously reported as a 5,600 increase in jobs). Full-time jobs rose by 42,300 but part-time jobs fell by 9,500. Economists had tipped an increase in total jobs of around 20,000. Hours worked rose by 0.3% in October and lifted by 2.1% over the year. Trend hours worked rose by 0.2% in October and lifted by 2% over the year. The unemployment rate was steady at a 6-year low of 5% in October. In trend terms, the jobless rate fell from 5.2% to 5.1%. In original terms, the jobless rate in October was 4.78% – the lowest rate in almost eight years (December 2010). 

Unemployment across states in October

1. NSW 4.4% (September 4.4%)

2. Victoria 4.5% (4.6%)

3. Queensland 6.3% (6%)

4. South Australia 5.4% (5.5%)

5. Western Australia 5.7% (6%)

6. Tasmania 5.3% (5.7%)

7. Northern Territory 4.6% (4.3%)

8. ACT 3.7% (3.7%).

How does this information affect investors?

Many companies are affected by the employment data but especially those dependent on consumer spending. Among stocks affected are Fairfax, West Australian Newspapers, Seek Limited, McMillan Shakespeare and Skilled Group.

What does it all mean?

More people looking for jobs, more people finding jobs, more hours worked and a jobless rate at 6-year lows. What’s not to like?

The employment market clearly remains firm. And that is clearly great news for consumer-focused businesses. It is not just the fact that jobs are growing and wage growth is lifting, it is also the fact that people are more secure in their jobs. And add in the fact that consumer confidence is above longer-term averages. All these factors will support household spending. It is worth noting that household spending is growing at the fastest pace in six years.  

Leading indicators such as job advertisements, skilled job vacancies and the NAB business survey point to further job gains and further tightening of the job market. Wage growth is lifting, but price inflation is still contained. But the process of “normalisation” of wages, prices and interest rates remains gradual, suggesting that interest rate settings will remain unchanged over at least the next 3-6 months.

At present however, the Reserve Bank will be happy to leave rate settings unchanged. But the extent of the tightening of the job market makes it hard to believe that the RBA will stay on the interest rate sidelines until 2021 as some analysts currently expect.

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Good morning, Australia!

Monday, November 12, 2018

Howd’y USA

Producer prices rose by 0.6% in October (forecast +0.2%) to be up 2.9% over the year. Excluding food and energy (core measure), prices rose 0.5% (forecast +0.2%) to be up 2.6% over the year (forecast +2.3%). Consumer sentiment fell from 98.6 to 98.3 in November (forecast 98.0).

US share markets fell on Friday as investors booked profits at the end of the week. But shares rallied from lows in the last 90 minutes of trade. Consumer staples stocks rose but oil, technology and consumer discretionary stocks fell. Investors fretted about the slowing of the Chinese economy. At the close of trade, the Dow Jones was lower by 202 points or 0.8% after being down 308 points. The S&P500 index was down by 0.9% and the Nasdaq index was down by 124 points or 1.7%. But over the week the Dow rose 2.8%, the S&P 500 rose by 2.1% and the Nasdaq gained 0.7%.

US treasuries were firmer on Friday (yields lower) as investors favoured defensive assets. US 2-year yields fell by 5 points to 2.93% and US 10-year yields fell by 6 points to 3.186%. Over the week US 2-year bond yields rose by 1 point and US 10-year bond yields fell by 2 points.

Major currencies were generally softer against the US dollar in US and European trade compared with the Asian close. The Euro fell from highs near US$1.1360 to lows near US$1.1315 and was near US$1.1335 in late US trade. The Aussie dollar eased from near US72.50 cents to US72.15 cents and was trading near US72.25 cents in late US trade. And the Japanese yen held between 113.65 yen per US dollar and JPY113.95 was near JPY113.80 in late US trade. 

Global oil prices fell again on Friday with Nymex down for the 10th straight day - the longest losing streak since 1984. Investors worried that a slower Chinese economy could crimp oil demand. And supply concerns eased with eight countries granted a waiver from US sanctions against Iran. Brent crude fell by US47 cents or 0.7% to US$70.18 a barrel and the US Nymex price fell by US48 cents or 0.8% to US$60.19 a barrel. Over the week Brent fell by 3.6% and Nymex fell by 4.7%.  

Bonjour Europe

European share markets were mixed on Friday. Disappointing earnings news from Germany's Thyssenkrupp (-9.2%) and luxury goods group Richemont (-6.4%) weighed on investor sentiment. The basic resources sector fell by 3.4% as metal prices fell. The pan-European STOXX600 index fell by 0.4% but rose slightly on the week. The German Dax was flat (up less than 0.1%) but the UK FTSE index fell by 0.5%. In London trade, shares of Rio Tinto fell by 3.3% and BHP fell by 3.5%. 

Top of the morning, London

Base metal prices fell by up to 2.7% on the London Metals Exchange on Friday with nickel down the most and zinc down the least (just -0.1%). Over the week, metals fell by up to 3.9% with nickel down the most. But tin rose 0.4%. 

The gold futures price fell by US$16.50 an ounce or 1.3% to $1,208.60 an ounce. The spot gold price was trading near US$1,209 an ounce in late US trade. Over the week gold fell by US$24.70 or 2%. Iron ore rose by US$1.00 or 1.3% to US$77.25 a tonne. Over the week iron ore rose by US$3.15 or 4.3%.

G’day Australia!

Data on credit and debit card lending is released. In the US, Veterans Day is observed with bond markets closed.

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Spotlight on our job market

Friday, November 09, 2018

On Monday

The week kicks off when the Reserve Bank releases September data on credit and debit card lending. Unfortunately, there have been revisions to data, making it more difficult to uncover trends. But the evidence still seems to show that credit and debit cards are being actively used although account holders are keen to pay off outstanding credit card debt by the due date.

On Tuesday

National Australia Bank releases the October business survey. In September, the index of business confidence lifted by 6.2 points, while business conditions rose just under 1 point to a 3-month high. Notably the employment index posted a solid gain in the month. And the regular weekly reading on consumer confidence is published by ANZ and Roy Morgan. The key issues at present are petrol and home prices together with the volatility on the share market. Overall, Aussie consumers seem to be weathering the choppy conditions. Also released Tuesday is the broader array of lending figures. The data on home loans is provided but together with business, lease and personal loans. In August, total new lending commitments (housing, personal, commercial and lease finance) fell by 1.5% to $69.3 billion. And commitments were down by 4.2% on the year. In trend terms, lending rose for the fourth month, up by 0.4%. Of note, loans to buy new or used cars fell to 25-month lows in rolling annual terms in August.

On Wednesday

The main gauge of wages in Australia – the wage price index – is released. In the June quarter, wages rose by 0.6%, lifting the annual rate from 2% to 2.1%. And including bonuses, wages were up 2.5% on the year.

Overall we expect the tighter job market to show up in the September quarter with wages up 0.7% in the quarter to stand 2.4% higher for the year.

And Westpac and the Melbourne Institute release the November monthly reading on consumer confidence. This indicator is more of a check on the weekly consumer confidence survey.

On Thursday

The October labour force data is released by the Australian Bureau of Statistics (ABS). In September, jobs rose by just 5,600 but the unemployment rate hit a 6-year low of 5%. Based on an array of solid survey evidence, we tip a 25,000 lift in jobs in October, leaving the jobless rate unchanged at 5%.

And Reserve Bank Deputy Governor, Guy Debelle, delivers a speech. 

On Friday

The ABS releases the State Accounts – data that reveals how fast the state and territory economies grew over the past financial year.

Activity data in focus in the US & China

In the US and China next week, the ‘top shelf’ indicators of retail sales and industrial production are released.

On Monday

In China, with the Association of Automobile Manufacturers scheduled to release October sales figures. Vehicle sales are down almost 12% on a year ago. And also in China, the scheduled data are the lending and money supply indicators for October. Loans are growing at a solid 13.2% annual rate.

In the US, the week begins on Tuesday. The National Federation of Independent Business releases the Small Business Optimism index. In September, the index fell from a record high of 108.8 to 107.9. The usual weekly data on chain store sales is also released, with the October monthly federal budget figures.

On Wednesday

In the US, the October inflation data – the Consumer Price Index – will be issued. Inflation is creeping, not leaping higher. In fact the annual core rate (excludes food and energy) may have remained at 2.2% in the month. 

On Thursday

In China and in the US, retail sales data for October will be issued. There is also additional data in China in the shape of industrial production and investment figures. In the US, retail sales are growing at a 4.7% annual rate. In China, sales growth is almost double the US with sales up 9.2% over the past year.

And in the US, there’s data on export and import prices and two key manufacturing surveys – the Empire State and Philadelphia Federal Reserve surveys. The usual weekly data on claims for unemployment insurance is also expected. And data on home prices is slated for release in China.

On Friday

In the US, data on industrial production is issued together with capital flows data. Economists expect a 0.2% lift in October production.

 

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Good morning, Australia!

Monday, November 05, 2018

Howd’y USA!

In the US, non-farm payrolls (employment) rose by 250,000 in October (forecast +190,000). The unemployment rate was unchanged at 3.7%. Average hourly earnings rose by 0.2% as expected with the annual rate up from 2.8% to a decade high of 3.1%. The trade deficit rose from US$53.3 billion to US$54bn in September (forecast US$53.6bn). Factory orders rose by 0.7% in September, with the ISM New York index down from 72.5 to 69.8 in October.

US share markets eased on Friday. US officials gave mixed signals on the extent of progress on trade talks with China. And the jobs data pointed to further rate hikes – most likely in December. Shares in Apple fell by 6.6% after warning that holiday sales may miss expectations. The Dow Jones ended lower by 110 points or 0.4% after tracking a 500-point range. The S&P500 index fell by 0.6% and the Nasdaq index lost 77 points or 1.0%. Over the week, the Dow and the S&P 500 both rose by 2.4% and the Nasdaq lifted by 2.7%.

US treasuries fell on Friday (yields higher) in response to strong US jobs data. Investors also favoured bonds over equities on worries about the trade dispute with China. US 2-year yields rose by 6 points to 2.91% and US 10-year yields rose by 9 points to 3.22%. Over the week, US 2-year yields rose by 8.5 points and US 10-year yields rose by 12.5 points.

Major currencies were softer against the US dollar in US and European trade compared with the Asian close. The Euro fell from US$1.1455 to US$1.1370 and was near US$1.1385 in late US trade. The Aussie dollar fell from near US72.60 cents to lows near US71.80 cents and was close to US72.00 cents in late US trade. And the Japanese yen eased from near 112.65 yen per US dollar to JPY113.30 and was near JPY113.20 in late US trade.  

Global oil prices eased on Friday. The US Secretary of State Mike Pompeo said that eight countries would be allowed to temporarily import crude from Iran when sanctions are applied against the country from Monday. Brent crude fell by US6 cents or 0.1% to US$72.83 a barrel, and the US Nymex price fell by US55 cents or 0.9% to US$63.14 a barrel. Over the week, Brent fell by US$4.79 or 6.2% with Nymex down by US$4.45 or 6.6%.

Hola, Europe

European share markets were mixed on Friday. The pan-European STOXX600 index rose by 0.3%. Over the week the STOXX600 index was up by 3.4% – the best weekly gain in almost two years. Hopes of a mending in the trade dispute between the US and China also buoyed investor sentiment. Trade-sensitive luxury stocks rose. The German Dax rose by 0.4% but the UK FTSE index lost 0.3%. 

Top of the morning, London

Base metal prices were higher by up to 3.5% on the London Metals Exchange on Friday with copper doing the best. But tin fell by less than 0.1%. Over the week copper rose by 1.8% with nickel up 0.2% but other metals fell with zinc down by 3.8%. In London trade, shares of Rio Tinto fell by 0.1% while BHP rose by 0.1%.

The gold futures price fell by US$5.30 an ounce or 0.4% to $1,233.30 an ounce. The spot gold price was trading near US$1,232 an ounce in late US trade. Over the week, gold fell by US$2.50 or 0.2%. Iron ore fell by US45 cents or 0.6% to US$74.10 a tonne. Over the week iron ore fell by US$2.90 or 3.8%.

G’day, Austraila

The CBA and AiGroup services gauges are released, with new vehicle sales and ANZ job ads. Have a great day, Australia!

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