Currency continues to fall after RBA commentary

Share Markets:

The US stockmarket had a strong session, continuing the recent trend, with little data flow or new information to provide direction.

The S&P 500 rose 0.5%, to close above 1,800 points for the first time and the Dow gained 0.3% to another record above 16,000 points. The Nasdaq rose 0.6% for the session.

Foreign Exchange:

The Aussie dollar continued its recent decline against the US dollar with investors remaining concerned about the value of the currency and the possibility of intervention following RBA Governor Steven's comments on the currency earlier last week.

The Aussie dollar fell to a low of 91.44 US cents, before opening a little stronger this morning.

The Yen depreciated further against the US dollar after the Bank of Japan kept its monetary easing strategy intact on Thursday.

Bonds: 

US government bonds rose (yields fell) on concerns about Fed tapering of monetary stimulus.

Comments from Atlanta Fed President Lockhart (a non-voting member in 2014) that debate over tapering would be 'on the table' at the Fed's December meeting drove market talk of tapering, although Lockhart said monetary policy is likely to be very accommodative for some time.

Comments from Kansas City Fed President George likewise suggested tapering would be discussed at the December meeting, although she indicated that these discussions were routine at the meetings, saying "these are discussions we have at each meeting."

Australian three-year government bond yields (implied by futures) fell from 3.16% to 3.12%, while the 10-year yield fell from 4.27% to 4.22%.

Commodities:

The copper price strengthened on hopes of a pickup in global economic growth and on declining copper inventories.

Australia:

No data was released on Friday.

Europe: 

The German IFO business climate index rose from 107.4 to 109.3 in November, still not quite as high as in early 2012, even though the current assessment after two months of slippage rose to a new 21-month high.

Expectations hit a new two-and-a-half-year high: they are back where they were just before the mid-2011 collapse in confidence related to Greece, slower US growth and impending Eurozone recession.

ECB chief Draghi defended low Eurozone rates in Germany today, acknowledging they penalised savers but pointing out that savers benefit by being in an economy that is getting the stimulus it needs to avoid a prolonged recession and the hardship that would bring.

United States:

The Kansas City Fed factory index edged up from 6 to 7 points in November. A year ago, this index was running modestly negative (-3 in November 2012), so this index is consistent with a recovery in regional manufacturing.


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