This is our weekly market update, where we start in the US, cross to Europe, and Asia, and end in Australia covering crypto and commodities on the way.
My earlier call of enhanced market volatility proved correct, as a gauge of global stocks took its biggest weekly drop in two months driven by market euphoria after the Trump win now turning, as the implications in terms of tariffs and staff appointments sink in and as trading profits are made. MSCI’s gauge of stocks across the globe lost 1.11%, to 842.61 for its fourth straight decline, following five straight advances. In Europe, the STOXX 600 index closed down 0.77% on the day and down 0.69% across the week. The 10-year U.S. Treasury yield hit its highest level in 5-1/2 months on Friday as economic data and comments from Federal Reserve officials indicated a slower pace of interest rate cuts ahead.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Digital Finance Analytics (DFA) Blog
Forget Seeking Certainty: Suddenly, The Fed’s Urge to Cut Rates Evaporates!
This is our weekly market update, where we start in the US, cross to Europe, and Asia, and end in Australia covering crypto and commodities on the way.
My earlier call of enhanced market volatility proved correct, as a gauge of global stocks took its biggest weekly drop in two months driven by market euphoria after the Trump win now turning, as the implications in terms of tariffs and staff appointments sink in and as trading profits are made. MSCI’s gauge of stocks across the globe lost 1.11%, to 842.61 for its fourth straight decline, following five straight advances. In Europe, the STOXX 600 index closed down 0.77% on the day and down 0.69% across the week. The 10-year U.S. Treasury yield hit its highest level in 5-1/2 months on Friday as economic data and comments from Federal Reserve officials indicated a slower pace of interest rate cuts ahead.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Can the Australian economy be weak, and strong at the same time? Or which is it? This is an important question because the answer will determine the future policy direction of interest rates, and the well-being of ordinary Australians. So I am going to do a deep dive on this in the light of the latest employment and wage rise data from the ABS.
While The RBA has made inroads into getting inflation under control, at 3.5 per cent, underlying inflation still remains above the central bank’s 2 per cent to 3 per cent target band. And even though the jobs market has softened, it is still far stronger than almost any time since the 1970s as data out today shows.
Yet Consumers have cut back sharply as they try to cope with 13 interest rate rises by the RBA and this decline in spending has caused economic growth to grind to a halt. On an annual basis, the economy grew by just 1 per cent in the year to June, down from an average of 2.7 per cent over the past 20 years. Excluding the pandemic, that marks the slowest rate of growth since the 1990s recession. And household financial stress based on our analysis is at peak as we discussed in my live show this week.
So we have an economy driven into overdrive by high migration and big government spending, forcing interest rates to stay higher for longer, yet with a low unemployment rate and people working till they drop. None of this helps to improve productivity the share of the economic cake continues to shrink on an individual basis. And those in the rental sector or with a large mortgage are under the pump.
My point is, bad policy over a couple of decades have got us to this point, but unless we radically change direction, this Messy And Complicated journey will continue to the detriment of many ordinary Australians and businesses. There is no Goldilocks zone here.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Digital Finance Analytics (DFA) Blog
The Australian Economy; Its Messy And Complicated!
Can the Australian economy be weak, and strong at the same time? Or which is it? This is an important question because the answer will determine the future policy direction of interest rates, and the well-being of ordinary Australians. So I am going to do a deep dive on this in the light of the latest employment and wage rise data from the ABS.
While The RBA has made inroads into getting inflation under control, at 3.5 per cent, underlying inflation still remains above the central bank’s 2 per cent to 3 per cent target band. And even though the jobs market has softened, it is still far stronger than almost any time since the 1970s as data out today shows.
Yet Consumers have cut back sharply as they try to cope with 13 interest rate rises by the RBA and this decline in spending has caused economic growth to grind to a halt. On an annual basis, the economy grew by just 1 per cent in the year to June, down from an average of 2.7 per cent over the past 20 years. Excluding the pandemic, that marks the slowest rate of growth since the 1990s recession. And household financial stress based on our analysis is at peak as we discussed in my live show this week.
So we have an economy driven into overdrive by high migration and big government spending, forcing interest rates to stay higher for longer, yet with a low unemployment rate and people working till they drop. None of this helps to improve productivity the share of the economic cake continues to shrink on an individual basis. And those in the rental sector or with a large mortgage are under the pump.
My point is, bad policy over a couple of decades have got us to this point, but unless we radically change direction, this Messy And Complicated journey will continue to the detriment of many ordinary Australians and businesses. There is no Goldilocks zone here.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
One of the themes which comes through in our household surveys is that many people are under financial pressure, but are holding out for interest rate cuts in the short term.
But America’s election outcome continues to reverberate across the globe.
Bond markets continue to push higher with the US 2 and 10 year moving up, a trend reflected on the Australian market too. With the 10 year up to 4.7% compared with 3.8% in the middle of September. The ASX 30 days cash rate futures is still trending down, but more slowly than recently.
Financial markets and economists have been consistently pushing back the timing of the first rate cut in Australia since 2022 because inflation has proved far more difficult to tame and the labour market has remained strong. Traders are now fully priced for a move in September next year.
But some reckon there is a much higher chance of no rate cut in 2025 that the market is pricing in.
The US dollar index, which measures the greenback against a basket of six currencies, climbed to a six-month high on Wednesday. The AUD was down to 65.25 cents against the USD.
A strong greenback is likely to stoke inflation in Australia because of higher prices of imported goods denominated in US dollars such as oil, complicating the RBA’s job to bring inflation down so that it can start lowering the cash rate.
While Trump’s policies will become more of a focus next year, for now, the RBA’s focal point is the Australian economy, where higher for longer is going to play out.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
One of the themes which comes through in our household surveys is that many people are under financial pressure, but are holding out for interest rate cuts in the short term.
But America’s election outcome continues to reverberate across the globe.
Bond markets continue to push higher with the US 2 and 10 year moving up, a trend reflected on the Australian market too. With the 10 year up to 4.7% compared with 3.8% in the middle of September. The ASX 30 days cash rate futures is still trending down, but more slowly than recently.
Financial markets and economists have been consistently pushing back the timing of the first rate cut in Australia since 2022 because inflation has proved far more difficult to tame and the labour market has remained strong. Traders are now fully priced for a move in September next year.
But some reckon there is a much higher chance of no rate cut in 2025 that the market is pricing in.
The US dollar index, which measures the greenback against a basket of six currencies, climbed to a six-month high on Wednesday. The AUD was down to 65.25 cents against the USD.
A strong greenback is likely to stoke inflation in Australia because of higher prices of imported goods denominated in US dollars such as oil, complicating the RBA’s job to bring inflation down so that it can start lowering the cash rate.
While Trump’s policies will become more of a focus next year, for now, the RBA’s focal point is the Australian economy, where higher for longer is going to play out.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
In this week’s market update I am going to focus on the path of interest rates, as over this past week midst the US election we got a swathe of Central Bank rate decisions. The RBA held the cash rate on Tuesday, but the Fed, the Bank of England, Sweden’s Riksbank and the Hong Kong Monetary Authority all cut.
While Donald Trump won’t return to the White House for another 10 weeks, he’s already casting a shadow over central banks and with Trump 2.0 expected to boost growth and risk returning inflation, and actually there was (reasonable) speculation that the Fed might not cut rates after all, or at least hint heavily that it would pause at next month’s meeting. Certainly, some economists now expect fewer rate cuts from the Fed next year as trade tariffs may boost US inflation. That could reshape the easing path for central banks around the world, and add currency pressure on emerging markets.
Australia’s economic output could fall between 0.8% and 1.5%, or $20 billion to $37 billion if Trump imposed a suite of his economic policies including slashing America’s 21 per cent corporate tax rate to 15% KPMG estimated.
So all up, the level of uncertainly ahead has been amplified by the Trump victory, and the consequences will spill over into other markets. But we can expect higher interest rates in the months ahead, which is not good for those holding on by the skin of their teeth. This is going to get messy.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
In this week’s market update I am going to focus on the path of interest rates, as over this past week midst the US election we got a swathe of Central Bank rate decisions. The RBA held the cash rate on Tuesday, but the Fed, the Bank of England, Sweden’s Riksbank and the Hong Kong Monetary Authority all cut.
While Donald Trump won’t return to the White House for another 10 weeks, he’s already casting a shadow over central banks and with Trump 2.0 expected to boost growth and risk returning inflation, and actually there was (reasonable) speculation that the Fed might not cut rates after all, or at least hint heavily that it would pause at next month’s meeting. Certainly, some economists now expect fewer rate cuts from the Fed next year as trade tariffs may boost US inflation. That could reshape the easing path for central banks around the world, and add currency pressure on emerging markets.
Australia’s economic output could fall between 0.8% and 1.5%, or $20 billion to $37 billion if Trump imposed a suite of his economic policies including slashing America’s 21 per cent corporate tax rate to 15% KPMG estimated.
So all up, the level of uncertainly ahead has been amplified by the Trump victory, and the consequences will spill over into other markets. But we can expect higher interest rates in the months ahead, which is not good for those holding on by the skin of their teeth. This is going to get messy.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
A popular poem penned by Sydney-born Dorothea Mackellar in the early years of last century speaks lyrically of a vast brown continent shaped by ragged mountain ranges, sweeping plains, jewel seas, golden noonday sun, droughts and flooding rains.
But today any description of Australia must refer to the vast record-breaking expanse of debt held by households, mostly for mortgages. Total loans outstanding are according to the RBA $1.58 trillion for owner occupied mortgages and a further $749.1 billion for investor mortgages.
Australia has the third-highest level of household debt for countries in the Organisation for Economic Co-operation and Development (OECD), worth 211% of net disposable income per household.
And the IMF reported that Australia has the highest level of mortgage stress in the developed world, according to figures from the International Monetary Fund, with 15% of income devoted to paying off loans. But that is an average across all households and small business. In fact, of course many are now putting 40% or more of their disposable income on mortgage repayments, crowding out other spending.
Borrowers have been floored by a series of rate rises by the Reserve Bank of Australia to the current 4.35%. The increased cost of borrowing has left Australia at the top of the league for debt with Canada second followed by Norway and the Netherlands.
I was asked to extract data from my household surveys for news.com.au and they published various articles including “Sydney Stressing Over $1m Home Loan Debt.
This comes as a recent survey from Finder.com.au revealed many homeowners were just months away from having to give up their properties due to financial duress. Close to one in seven mortgage holders told the poll they would be forced to sell or seek hardship from their bank unless rates were cut by February.
As I said in the article, the amount of debt we have compared to incomes makes us massive outliers compared to the rest of the developed world.
Of course the pain is not equally shared, but more detailed analysis shows that in some areas of the country the average owner occupied mortgage is in the millions. So today, I am going to share my more detailed analysis, using our mapping tools.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
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Today’s post is brought to you by Ribbon Property Consultants.
Digital Finance Analytics (DFA) Blog
Australia, The Land Of Droughts, Flooding Rains And Massive Household Debt!
