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Weekly Economic Commentary

Weekly Economic Commentary

Categories: Commodities, General

Our share market posted its biggest daily jump in seven months last week. This came on the back of a rally in global equities after the US Federal Reserve provided reassurance it plans to keep its monetary policy “supportive” for many months to come.

Our market followed equity markets in the US, Europe and the UK higher as investors turned their attention away from the ongoing geo-political risks in Iraq and toward the US Fed and the Bank of England, which both kept interest rates on hold.

Continued concerns that the violence in Iraq will lead to supply disruptions from the world's second largest oil exporter pushed oil prices to a nine month high last week.

Gold rose sharply in response to the ongoing instability in Iraq as well as a weaker US Dollar– the gold price jumped over $50 or 4.1% last week and pushed through $1,300 an ounce for the first time in almost two months.

As far as interest rates are concerned, short term yields are virtually unchanged while long term yields fell on expectation that rates are not going to rise until next year and then by not as much as previously thought.

A Reflection

The end of the financial year is in sight and this gives me an opportunity to summarise, or more precisely reflect on the performance of our key market indicators.

Rates- There has only been one change in the official cash rate this year, the 25 basis point rate cut coming in August 2013, with cash now at 2.50%. The 90 day bill rate has fallen from 2.81% to 2.70% over 2013-14 while the 10-year bond yield is virtually changed over the year at around 3.70%.

Currency- The Australian Dollar is only marginally higher over the year, posting a level of USD 0.9275 last July and currently trading around USD0.9400.

Equities - The big mover however was the Australian share market which started 2013-14 with the All Ordinaries at 4,775.4 and currently the All Ords is near 5,363 points, that’s up 12.3% over the year.

Source: Rural Bank

 

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