Business

St George Economics economy and finance update

Share Markets:

Following a solid run in recent weeks, US equity markets took a breather last night. There was no new economic news and European markets were equally lacklustre.

Bonds:

With equities flat, bonds remained in a very tight range overnight. German 10 year bond yields closed unchanged at 1.96% while US long bonds saw yields edged up 1 basis point to 1.96%. Australian 10 year bond yields now stand at 3.45%.

Foreign Exchange:

Comments out of Europe and Japan stirred markets last night. Talk of 'currency wars' has unsettled some players to the point where the G7 appears set to release a paper reiterating their combined belief in market determined exchange rates.

An ECB council member Jens Weidmann expressed his belief that the euro had not become overvalued while Japan's Economy Minister suggested that Japan had further to go in easing monetary policy.

The US dollar gained against yen, moved lower against the euro and was marginally stronger against the AUD overnight.

Commodities:

Oil prices rose for the first time in four days more on currency movements than on news about the global economy or supply issues.

Both copper and gold prices slipped lower pulling the overall commodities index down.

Australia:

Housing finance fell 1.5% in December, driven by a decline in refinancing and a fall in first home buyer demand (due to changes to first home buyers' grants in NSW and Queensland).

Excluding refinancing, new home loans slipped 0.1% in December, although it was the third consecutive monthly decline in this measure.

Although the weakness in December's housing finance may have been exacerbated by temporary factors, it appears likely the demand for housing finance has tapered off in recent months.

China:

No data released.

Europe:

No data of note released.

Japan:

According to the head of the Asian Development Bank, recent actions by the Bank of Japan to ease monetary settings could usher in significant growth for the Japanese economy.

Japan's Economy Minister, Akira Amari has noted that Japan has room to further ease monetary policy.

The Minister appears to be in the running to become the next head of the Bank of Japan.

United States:

No data of significance released.

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The information contained in this report (the Information) is provided for, and is only to be used by, persons in Australia. The information may not comply with the laws of another jurisdiction. The Information is general in nature and does not take into account the particular investment objectives or financial situation of any potential reader. It does not constitute, and should not be relied on as, financial or investment advice or recommendations (expressed or implied) and is not an invitation to take up securities or other financial products or services. No decision should be made on the basis of the Information without first seeking expert financial advice. For persons with whom St.George has a contract to supply Information, the supply of the Information is made under that contract and St.George's agreed terms of supply apply. St.George does not represent or guarantee that the Information is accurate or free from errors or omissions and St.George disclaims any duty of care in relation to the Information and liability for any reliance on investment decisions made using the Information. The Information is subject to change. Terms, conditions and any fees apply to St. George products and details are available. St.George or its officers, agents or employees (including persons involved in preparation of the Information) may have financial interests in the markets discussed in the Information. St.George owns copyright in the Information unless otherwise indicated. The Information should not be reproduced, distributed, linked or transmitted without the written consent of St.George.

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