Originally published by Rivkin Securities
Another strong session for US markets on Friday saw the Dow Jones Industrial Average close 0.7% higher while the S&P 500 rose 0.5%. Federal Reserve Chair Janet Yellen spoke at the National Economics Club dinner and mentioned that the low inflation readings since March of this year had been a surprise to the Fed and were not readily explainable. Nevertheless, Yellen is pleased with the progress regarding the removal of stimulus which has so far caused very little market turmoil. In fact, the stock markets continue to break record highs despite the removal of stimulus. Although bond yields have risen, the balance sheet reduction process has not (so far) sent yields surging with the 10-year bond currently trading at 2.38%, similar to where it was in July and still lower than the 2.63% reached in March.
The S&P/ASX 200 continues its breakout rally as it closes in on year-to-date highs and futures this morning are pointing to a higher open again following the strong leads from the US. The Australian stock market has significantly lagged the US this year and the recent rally feels like some sort of ‘catch-up’ rally as investors appear to have become less concerned about a correction.
Oil prices are holding comfortably above $50 as possible supply disruptions in the Kurdish region of Iraq support prices. US production was also recently impacted by a hurricane for the second time in as many months and the number of US drilling rigs declined for the third week in a row. The rig count is seen as a leading indicator of production as producers require drilling rigs to drill new wells and expand their production capacity. A decline in the rig count signals that production in the US may be leveling off.
Although there is no significant economic news out today, later in the week we get Australian CPI (Wednesday), US Durable Goods Orders (Wednesday), Euro Rate Decision (Thursday) and finally, US 3rd quarter GDP (Friday).
Data Releases:
- No Significant Data