Odds of a US rate rise rocket
The US Federal Reserve will step back on to centre stage this month with everyone wanting to know whether they'll hike rates in December. The market had only given a 35 per cent chance to a December rise, but this flipped dramatically to 70 per cent when the latest US employment report was released.
The game changing report was strong in all aspects - the unemployment rate, the number of new jobs and a fall in the under-employment rate to less than 10 per cent – but most importantly, there was a strong increase in wage growth - the strongest annual wage growth since mid-2009.
Of course, there is still one more employment number due out before the December meeting so it's not a given that rates will be hiked.
- sponsor - Wealth Know How
Wealth Know How is the online network helping people manage their wealth through financial education. Whether you are looking for simple ways to better manage your cash, or you are after a complete strategy on how to save for retirement, we can help you understand your options. It is important to have a vision for your future, but its knowledge not dreams that will ultimately deliver financial success.
Published on 10 Nov 15
-
-
Venezuela tension heats up
Duration 03:16
-
Aussie dollar surprises market
Duration 03:10
-
Markets climb as investors watch US healt...
Duration 02:31
-
-
The US Federal Reserve will step back on to centre stage this month with everyone wanting to know whether they'll hike rates in December. The market had only given a 35 per cent chance to a December rise, but this flipped dramatically to 70 per cent when the latest US employment report was released.
The game changing report was strong in all aspects - the unemployment rate, the number of new jobs and a fall in the under-employment rate to less than 10 per cent – but most importantly, there was a strong increase in wage growth - the strongest annual wage growth since mid-2009.
Of course, there is still one more employment number due out before the December meeting so it's not a given that rates will be hiked.Sponsor - Wealth Know How
Wealth Know How is the online network helping people manage their wealth through financial education. Whether you are looking for simple ways to better manage your cash, or you are after a complete strategy on how to save for retirement, we can help you understand your options. It is important to have a vision for your future, but its knowledge not dreams that will ultimately deliver financial success.
-
Venezuela tension heats up
Duration 03:16
-
Aussie dollar surprises market
Duration 03:10
-
Markets climb as investors watch US healthcare bill
Duration 02:31
The game changing report was strong in all aspects - the unemployment rate, the number of new jobs and a fall in the under-employment rate to less than 10 per cent – but most importantly, there was a strong increase in wage growth - the strongest annual wage growth since mid-2009.
Of course, there is still one more employment number due out before the December meeting so it's not a given that rates will be hiked.
The response to the latest jobs report from the foreign exchange and fixed income markets was exactly as expected. The US Dollar strengthened against all currencies and bond yields rallied.
The reaction from equity markets, however, is harder to predict. Overall, they've been pretty quiet which speaks to equity resilience. This is also consistent with the view expressed back in August that the market were much more fearful of China policy than it was about the Fed. But with fear about China abating, the Fed's decision will again dominate the market.
Another thing to keep in mind is that so far this year the markets have followed seasonal expectations - rallying into February, selling in May etc. If the trends hold true, we may therefore see the Christmas rally beginning in mid-November.
Australia's employment report is also due out this week. As these reports have tended to be stronger than expected there could be a surprise on the upside. That said, the unemployment rate will probably remain relatively constant.
Australia’s September quarter GDP growth was expected to be the weakest quarter of 2015 but with net trade now adding more than expected to growth, GDP growth could be much stronger.
Whilst we are on the theme of labour markets, the Chinese labour market remains relatively tight despite the slowing economy. We see evidence of this in the strong retail sales numbers and official employment reports.
The strong labour market means there is no pressure on Chinese authorities to rapidly stimulate the economy given it seems to be doing a good enough job on its own.