Global equities remained fragile over the past week with most markets trading lower driven by continued investor nervousness around the US technology sector, weaker oil prices and slightly more cautious comments from Fed officials.
Lower volumes were traded late in the week due to the Thanksgiving holiday in the US.
The weakness in equity markets pushed government bond yields lower and the more dovish Fed commentary saw the US Dollar weaken marginally against other major currencies.
Oil prices lost a further 5 per cent over the past week as President Donald Trump made further remarks that may be aimed at keeping Saudi Arabia from cutting production at the December meeting among OPEC and non-OPEC members.
Oil prices lost a further 5 per cent over the past week as President Donald Trump made further remarks that may be aimed at keeping Saudi Arabia from cutting production at the December meeting among OPEC and non-OPEC members.
WTI Crude is now down 25.1 per cent and Brent Crude down 23.5 per cent on a monthly basis.
The S&P/ASX 200 was marginally higher over the week despite our resources sector selling off.
The likes of BHP Billiton (BHP), RIO Tinto (RIO) and Woodside (WPL) were weaker on the back of tumbling oil prices.
Our banks lifted the market as round seven of the Royal Commission continued to play out, with management remuneration and pay in focus at the hearings.
The demerger of Coles (COL) from Wesfarmers (WES) was finalised as the companies became separate listed entities. COL traded largely in line with consensus valuation estimates.
On the data front, Australian employment growth exceeded expectations, adding 32,800 jobs in October.
This lifted annual jobs growth to 2.5 per cent.
The number of hours worked rose 2.1 per cent year on year, suggesting annual growth in labour productivity is a little over 1 per cent.
Despite a small lift in labour force participation, the unemployment rate remained steady at a six year low of 5 per cent.
In the US, questions around the Fed’s rate hiking path arose following softer CPI data.
The US headline CPI rose 0.3 per cent in October, lifting annual inflation from 2.3 per cent to 2.5 per cent which was in line with expectations.
Core CPI rose 0.2 per cent as expected, but annual core inflation unexpectedly edged down to 2.1 per cent from 2.2 per cent.
The RBA minutes indicated that they continue to expect the next rate move to be up, however no change in the near term is likely.
The RBA notes it is surprised with the upside by most components of GDP and improvement in the unemployment rate however notes wages and inflation is broadly in line with expectations.
As the story has been of late, the RBA is waiting for upwards momentum in wages and inflation to spur a rate hike.
At this time it looks possible that the RBA may raise rates in the middle of next year.
However, if wages growth and inflation continue to stall this could be pushed out.
- This article does not take into account the investment objectives, financial situation or particular needs of any particular person. Accordingly, before acting on any advice contained in this article, you should assess whether it is appropriate in light of your own financial circumstances or contact your financial adviser. Christopher Hindmarsh is an adviser at JBWere Limited. JBWere Limited is owned by National Australia Bank Limited.
