Sour weekend for markets

Share Markets:

Equity market lost ground on Friday night as the lower oil price raised concerns about the outlook for global economic growth and as the initial optimism over the Fed's rate hike dissipated.

The Dow fell 2.1%, the S&P 500 lost 1.8% and the Nasdaq was down 1.6% for the session. This followed declines in Europe, with the Euro Stoxx down 1.4% for the session.

Interest Rates:

US government bond yields fell on Friday night as investors opted for the relative safety of government bonds.
Richmond Fed President Lacker said that Fed member forecasts for four interest rate hikes in 2016 would be a gradual pace, saying "that's half the rate at which we raised rates in the last tightening cycle. So that's what 'gradual' means to me." "I hope we're not behind the curve" said Lacker, who is a hawke and a non-voting member in 2016.

San Francisco Fed President Williams said "every meeting will truly be live in terms of adjusting policy one way or the other."

Williams said there was value in having the first move coinciding with a press conference but that "in the future I don't think that's as much of an issue."

Australian bond yields fell on Friday and on Friday night, Australian bond yields (implied by futures) fell further, following the move in global bond yields.

Foreign Exchange: 

The US dollar index (weighted against a basket of currencies) weakened on Friday.

The Euro strengthened for the session, but remains below its level prior to the Fed decision last week. The Yen gained ground against the US dollar on Friday after limited additional easing by the Bank of Japan.

The Aussie dollar gained against the broadly weaker US dollar, despite a further fall in commodity prices. AUD/USD rose from 0.7112 on Friday morning, to touch a high of 0.7200 on Saturday morning. It is currently trading at around 0.7177.

The Aussie dollar weakened versus the Euro and the Yen, but gained ground against Sterling amid expectations the Bank of England will leave rates on hold for some time.


The oil price fell further, losing US$0.20 to finish at US$34.70 per barrel as a rising number of oil rigs in the US indicated global oversupply would continue.

Australia: No domestic data to report.


New home prices on average rose 0.9% over the year to November, and continue to signal stabilising in the property market. There however, remains a divergence between cities.

The business MNI indicator rose from 49.9 in November to 52.7 in December.


The Bank of Japan (BoJ) left the target rise in the monetary base at 80 trillion yen as widely expected. However, it announced it will extend the maturities of its bond purchases from the beginning of next year.

The BoJ also announced it would purchase additional exchange-traded funds aimed at supporting company spending on capital expenditure.

New Zealand:

ANZ job ads rose 2.0% in November, the third consecutive monthly rise, and provide a positive sign for New Zealand's labour market.

United States:

The US leading index was stronger than expected, rising 0.4% in November, after increasing by 0.6% in October, according to the Conference Board.

The current account deficit widened to US$124.1bn in Q3, from a deficit of US$111.1bn in Q2 (previously reported as a deficit of US$109.7bn). It was the largest current account deficit since Q4 2008.

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