Rate rise rollercoaster loops the loop
Two weeks ago the market was awash with talk of a June interest rate rise in the United States. But poor data has sent the rate rollercoaster around the tracks again with expectations of a rise pushed out to later in the year.
The main driver was a poor US employment report, which was then reinforced by an unexpected dip in US service sector activity. The market is concentrating on the most recent data and discounting the better than expected US data out during last week.
Non-farm payrolls rose by a much smaller than expected 38,000 last month. The jobless rate, however dropped to 4.7% driven by a big fall in the labour force.
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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 07 Jun 16
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Two weeks ago the market was awash with talk of a June interest rate rise in the United States. But poor data has sent the rate rollercoaster around the tracks again with expectations of a rise pushed out to later in the year.
The main driver was a poor US employment report, which was then reinforced by an unexpected dip in US service sector activity. The market is concentrating on the most recent data and discounting the better than expected US data out during last week.
Non-farm payrolls rose by a much smaller than expected 38,000 last month. The jobless rate, however dropped to 4.7% driven by a big fall in the labour force.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.
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Venezuela tension heats up
Duration 03:16
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Aussie dollar surprises market
Duration 03:10
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Markets climb as investors watch US healthcare bill
Duration 02:31
The main driver was a poor US employment report, which was then reinforced by an unexpected dip in US service sector activity. The market is concentrating on the most recent data and discounting the better than expected US data out during last week.
Non-farm payrolls rose by a much smaller than expected 38,000 last month. The jobless rate, however dropped to 4.7% driven by a big fall in the labour force.
Of course, things are rarely black and white and there is another way to look at the data. You see, the slack in the US labor force is less than expected and the US is now approaching full employment. And this tends to result in slower job growth because it’s harder to add incremental jobs.
Moving to a different topic with a quick look at valuations.
There are many in the market who think that equities are overvalued. But the bigger overvaluation issue may lie in the sovereign debt markets.
There is now $10.4 trillion of sovereign debt with negative yield to maturity. And the number is rising. This is a much bigger issue of overvaluation than the stock markets.
The Reserve Bank of Australia didn’t cut interest rates this month. However, they left the door open for a cut from 1.75% to 1.50% at its August meeting. The approach being taken by the RBA is interesting given growth is at a three-and-a-half-year high which appears to suggest that the Australian economy is firing on all cylinders.
Growth last quarter was driven by consumption and service sector exports, particularly tourism. This increase in service sector exports is why the RBA will be keen to maintain a low AUD.