St George Economics economy and finance update

Share Markets:

Share markets were buoyed by a positive jobs report, which saw the Dow hit a new record high.

Last night, the Dow rose 0.3%, the S&P500 gained 0.1%, while the Nasdaq fell 0.1%.

 

Bonds:

US treasuries fell (yields rose) on signs that the US labour market was improving.

10-year yields had their biggest one day gain in three weeks, although they remain low - below two percent.

 

Foreign Exchange:

The US dollar rose against the euro and the yen as the European Central Bank (ECB) and the Bank of Japan (BoJ) hold their meetings today.

Expectations are mounting that the ECB could signal further interest rate cuts.

The BoJ is expected to sit pat today, but to ramp up bond purchases in April when the new governor, Kuroda begins. 

The Australian dollar lifted slightly after GDP data yesterday and a positive risk environment, but weakened overnight despite a better-than-expected US jobs report.

 

Commodities:

Most commodity prices were weaker, with the CRB index lower.

Oil prices fell after US inventories rose by more than forecast.

Meanwhile, gold prices rose, supported by news that South Korea's central bank increased its holdings in February.
 

Australia:

GDP growth rose a modest 0.6% in the December quarter, which left the annual rate steady at 3.1%.

In the December quarter government investment and net exports were the largest contributors to growth, while household consumption disappointed and non-dwelling construction subtracted from growth.

Encouragingly, dwelling investment contributed slightly to growth in the December quarter, its first positive contribution since early 2011, suggesting lower interest rates started boosting the housing sector in late 2012.

The household saving ratio edged down to 10.1 in the December quarter, however, it remains well above the 10-year average, despite a fall in incomes in the quarter.

With mining investment set to peak, other sectors will have to fill the breach.

Significant rate cuts through 2012 should continue to support economic growth.
 

Europe:

Euro zone GDP growth was confirmed at -0.6% in Q4. Revisions now indicate that the current recession has been five quarters long.
 

United Kingdom:

UK house prices rose 0.5% in February to be up 1.9% in the year according to the Halifax.
 

United States: 

US ADP private payrolls rose 198k in February, while January's result was revised up by 23k to 215k.

It provides an encouraging sign for the labour market in February, ahead of the non-farm payrolls report due on Friday.

Consensus is expecting a 163k rise in employment in the non-farm payroll report February.

US factory goods orders fell 2% in January, with the previously reported 4.9% fall in durables (mostly due to aircraft) partially offset by a 0.6% rise in non-durables.

Factory inventories rose 0.5% in January.

The US Beige Book indicated that economic activity expanded at a modest to moderate pace, a similar assessment to the previous Beige Book.

The report also noted that the housing recovery was spilling over to other sectors of the economy, such as manufacturing tied to home construction.

Consumer spending had been dampened by fiscal policy, rising gas prices and severe weather in some districts.

Labour market conditions had generally improved.

 

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