Economic and market news
This week’s news has been dominated by the conflict and humanitarian crisis in Israel and the Gaza strip. Related to this, there was considerable concern about the impact a crisis-related surge in oil prices will have on inflation across the world. It had been thought that many major economies were at or close to the peak in official interest rates, as central banks had been seeing signs their monetary tightening is succeeding in bringing inflation back towards targets. However, significant rises in the cost of fuel will add to household and business costs generally and potentially undo recent progress in slowing price rises.
Aligned with this, the minutes of the Reserve Bank of Australia's October policy meeting released yesterday were taken as suggesting that there is now an higher chance of an interest rate rise in November. In particular, comments that the board has ‘a low tolerance for a slower return of inflation to target than currently expected’, bolstered views that the RBA are not only concerned about the inflationary impact of oil prices, but also about the potential for high wages growth to continue underpinning strong price inflation in the labour-intensive services sector.
In overseas economic news, new data show that annual inflation in the United States remains ‘sticky’. Consumer prices recorded the second month of growth at 3.7 per cent. The figure was said to have been driven by persistently high rental costs, and to be ‘underpinned’ by the persistent strength of the labour market which is supporting consumer demand. Markets are pricing in a higher chance of official interest rates staying ‘higher for longer’.
Australian indices
ASX 200: Rose only slightly this week (0.22 per cent), to close at 7056.1 points on Tuesday.
All Ordinaries: Also rose (0.19 per cent), closing at 7244.4 points on Tuesday.
Government Bonds
Government Bond Yields (Source: Bloomberg)
|
NAME |
COUPON |
PRICE |
YIELD |
1 DAY |
1 MONTH |
1 YEAR |
|
GTAUD2Y:GOV Australia Bond 2 Year Yield |
0.25
|
92.23 |
4.16% |
+13 |
+31 |
+78 |
|
GTAUD5Y:GOV Australia Bond 5 Year Yield |
2.75 |
93.44 |
4.19% |
+13 |
+33 |
+49 |
|
GTAUD10Y:GOV Australia Bond 10 Year Yield |
3.00 |
87.59 |
4.54% |
+9 |
+44 |
+52 |
|
GTAUD15Y:GOV Australia Bond 15 Year Yield |
3.25 |
83.11 |
4.78% |
+9 |
+45 |
+49 |
Reserve Bank of Australia (Source:RBA)
|
RBA CASH RATE TARGET (RBATCTR:IND) CURRENT (per cent) |
MOST RECENT DECISION (percentage points) |
MOST RECENT CHANGE (percentage points) |
1 YEAR PRIOR (per cent) |
|
4.10 |
No change (3 October 2023) |
+0.25 (6 June 2023) |
2.60 |
Currencies (source:RBA)
As at the close on 17 October, the AUD/USD had fallen over the week, down 0.87 per cent, to 0.6355. The AUD/RMB also fell, down 0.53 per cent in the period, closing at 4.6473 on Tuesday.
Commodities
The conflict in the Middle East led to gains in 'safe haven' commodities such as gold, and also global oil prices. Oil futures were said to have seen their biggest weekly gains since February.
Venture Capital
Morse Micro
It has been revealed by Forbes Australia that Stoic investee Morse Micro is one of the 17 companies that received the ‘lion’s share’ of the venture capital funding in Australia during the last financial year. The figures show that even in a tight funding climate, good ideas and companies are still attractive to investors.
Property
It was reported that auction clearance rates were strong again over the weekend, despite the focus on the referendum. This was reportedly in part due the ongoing tightness in supply of properties for sale. Total listings were said to be about 18 per cent below average, compared with previous spring selling seasons.
However, it was also reported that property investors are pulling out of the Sydney and Melbourne markets amid lower capital gains and the large increase in holding costs. The portion of investor-owned listings has apparently increased to 60 per cent across Melbourne city over the three months to the September quarter, up from 56.7 per cent from the previous quarter and a sharp jump from the 50.9 per cent share a year ago.
