Economic report: New home sales dropped in November

Australia: 

WBC-MI consumer inflation expectations edged down from 4.0% in December to 3.6% in January, and remain well-contained.

Expectations are likely being kept down by lower oil and petrol prices.

HIA new home sales dropped 2.7% in November, the third consecutive monthly fall. It coincides with some softening in dwelling prices towards the end of last year.

Share Markets:

Sentiment continued to recover overnight, helped by a lift in oil prices. Comments by European Central Bank (ECB) President Draghi also provided a circuit breaker, raising the chances of further monetary stimulus as soon as March.

European shares jumped 2.1%, while US stocks rose moderately. The Dow rose 0.7%, while the S&P500 rose 0.5%.

Interest Rates:

Yesterday's fall in yields was partially reversed, as risk appetite returned. The yield on 10-year US notes rose 4 basis points to 2.02%.

Foreign Exchange:

The US dollar index spiked, but then lost most of those gains. Similarly, the euro initially fell sharply against the US dollar on the back of ECB president Draghi's comments that further monetary easing was possible but then recovered those losses as the session wore on.

The US dollar gained against the Japanese yen, as sentiment improved. The recovery in sentiment was also helpful for the Australian dollar, which poked above 70 US cents this morning.

Commodities:

Oil prices jumped, with the US WTI benchmark touching back above $30 a barrel at one point. The pickup in risk appetite and comments from the ECB were supportive of prices.

The better risk appetite was also supportive of prices of other commodities, including copper. Gold prices tracked sideways.    

Europe:

The European Central Bank (ECB) has hinted that further policy easing was possible at its next meeting in March amid downside risks to growth and inflation. Concerns appeared to centre on inflation and lower energy prices, which were likely to last.

In data news, consumer confidence weakened from -5.7 to -6.3 in January, likely a reflection of recent market ructions and global concerns.

New Zealand:

ANZ job ads rose 1.1% in December, having risen for four consecutive months and point to a pickup in employment.

The BusinessNZ manufacturing PMI rose from 54.9 in November to 56.7 in December, its strongest in over a year, and add to signs of strengthening activity towards the end of last year.

Consumer confidence rose 2.3% in January to a reading of 121.4, indicating ongoing optimism despite worries abroad and in financial markets.  

United States:

The Philadelphia Fed index improved from -10.2 to -3.5 in January. Although still in decline, it was the best result in five months.

Initial jobless claims rose from 283k to 293k for the week ending 16 January, the highest in six months, and saw the four-week moving average up 6.5k to 285k.

Despite the increase, claims are not showing a big enough deterioration to be worrying, remaining below 300k.



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