Numbers show mixed housing results after rate cut

Australia:

New loans for owner occupiers fell 1.0% in May, following a 1.4% increase in April.

Despite the decline, the number of new owner occupier home loans jumped 11.4% in the year to May, the strongest annual growth in over two years.

The value of housing loans for investors rose 3.9% in May, the first increase in three months.

Yesterday's housing finance data paints a mixed picture of housing lending following the RBA's interest rate cut in May.

Share Markets: 

The Dow and the S&P500 reached record highs in the wake of ongoing economic growth and low interest rates.

Investors are placing a low probability of the Fed lifting the Fed funds rate during 2016.

The Dow rose a further 0.4% last night, the S&P500 was up 0.3% and the tech heavy Nasdaq rose 0.6%.

In Europe, the mood was also buoyant. The FTSE100 rose 1.4%, the Dax was up 2.1% and the French CAC40 index rose 1.8%.

Interest Rates: 

The firmer demand for shares saw demand for US bond decline and yields on 10 year government bonds rose 7 basis points to 1.43%.

Two year US yields rose 2 basis points to 0.65% while 90 day yields were steady at 0.28%.

There were small increases in German and Japanese long bond yields but they both remain negative.  Australian two and ten year yields also edged higher yesterday but 90 yields were steady.

Foreign Exchange:

The US dollar index rose to a four-month high while the euro ranged sideways.

The UK pound outperformed, helped by news of Theresa May's succession to the PM role this week. The yen underperformed in the wake of Japanese PM Abe's indications of further sizeable stimulus. Despite the positive sentiment, AUD was held back by US dollar strength.

Commodities: 

The price of oil fell as the US oil rig count rose and as the US dollar firmed.

Copper prices rose on speculation of a Japanese economic stimulus package and on the coat-tails of the  US job numbers released last week.

Gold was weaker on a decline in risk aversion and the firmer US dollar while the price of iron ore was steady at $US55 per tonne as Port Hedland in Western Australia, the world's largest iron export port, reported record ore export volumes in June.

Japan:

After the ruling party scored a convincing victory in Sunday's upper house election, the focus has turned to Japanese PM Abe's plans for fiscal stimulus.

Details of the scale and financing of the package remain unclear, though Abe pledged to take "broad, bold" measures to support the economy.

He has also announced a delay to a planned sales-tax increase. Abe said that he will order ministers to begin compiling the stimulus package immediately.

Machine orders in Japan fell 1.4% in May, which was weaker than expected, following a decline of 11.0% in April.

For the year to May, machine orders fell 11.7%, deteriorating from a decline of 8.2% in the year to April. This data suggests there could be more weakness ahead for capital expenditure in Japan.

New Zealand:

Card spending rose 1.0% in June, following a decline of 0.6% in May. For the year to June, card spending lifted 5.9%, up from an increase of 5.3% in the year to May.

United Kingdom: 

The UK will have a new prime minister by the end of the week after one of the two contenders for the position withdrew from the contest. Home Secretary, Theresa May will succeed David Cameron.

The new UK prime minister will lead negotiations to take Britain out of the European Union.

United States: 

The Fed's labour market conditions index fell 1.9 points in June. The index is a composite of 19 already released labour market indicators.

It has fallen for a sixth consecutive month suggesting that the labour market still contains some slack and that strong upward pressure on wages is unlikely to emerge in the short term.


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