Dwelling prices continue to climb out of new buyers' reach

Share Markets:

US equity markets edged higher despite a run of disappointing economic data overnight. The Nasdaq hit a 15-month high, rising 0.8% for the session. The Dow and S&P500 were also higher.

Interest Rates: 

US treasuries weakened (yields rose), as stronger risk appetite dampened demand for government bonds.

In Australia, yields on bond futures fell, but then lifted to be little changed. Yields on 3-year bond futures were at 1.80%, while yields on 10-year bond futures were at 2.46%.

Foreign Exchange:

The US dollar index rose slightly, and hit its highest in 11 years. 

The Australian dollar weakened ahead of the RBA board meeting today. Markets are pricing in a near 60% chance that the RBA will cut the cash rate by 25 basis points.

We expect that it will leave rates unchanged, but recognize that a decision to cut today is possible. Either decision will likely see a reaction in the AUD.

Commodities:

Oil prices slipped in the US and the Brent benchmark fell sharply on speculation that a nuclear deal would lift sanctions on Iran. Gold prices fell, in step with a stronger US dollar.

Australia: 

Australia-wide dwelling prices jumped a further 0.3% in February following a 1.3% surge in January, according to Corelogic RP Data.

Prices have now risen in ten of the past twelve months and are at an all-time high.

Over the year to February, dwelling prices rose in all capital cities. Sydney was by far the strongest market over the past twelve months with prices rising 13.7%. They were up 7.4% in Melbourne, 5.9% in Brisbane, 3.4% in

Adelaide, 1.8% in Canberra, 1.6% in Darwin, 0.7% in Hobart and 0.5% in Perth.

Gross company operating profits fell 0.2% in the December quarter, the third consecutive quarterly decline. For the year to the December, company profits fell 5.9%. Mining profits fell 19.3% in the year to the December.

The AiG Performance of Manufacturing index fell from 40.0 in January to 45.4 in February.

The TD Securities - Melbourne Institute measure of monthly inflation was flat in February to be up 1.3% over the year.

Europe:

The unemployment rate in the euro zone unexpectedly fell from a revised 11.3% to 11.2% in January. Although it remains elevated, it was the lowest since April 2012.

Headline CPI rose from -0.6% in the year to January to -0.3% in February, slightly above the median estimate of -0.4%, but still in contraction. The core rate of annual inflation was unchanged at 0.6%.

Japan:

Capital spending stepped down from an annual pace of 5.5% in the September quarter to 2.8% in the December quarter.

United Kingdom:

House prices in the UK fell 0.1% in February, the first fall in five months, according to Nationwide. Nonetheless, low interest rates and the improving labour market are expected to support the housing market. 

The manufacturing PMI rose from a revised 53.1 in January to 54.1 in February, the highest in seven months.

United States:

Consumer spending fell 0.2% in January, the second consecutive monthly fall (consensus -0.1%).

After adjusting for inflation, consumer spending rose 0.3% reflecting the impact of lower gas prices. Incomes grew at 0.3% in January, also a touch below expectations of 0.4%.

In other data, the ISM manufacturing index slipped from 53.5 in January to 52.9 in February.

January's reading was the lowest in a year, and suggests manufacturing activity softened.

In contrast, the manufacturing PMI published by Markit, a relatively newer survey, rose from 53.9 in January to 55.1 in February, but down from its recent high around mid-2014.

Construction spending fell 1.1% in January, also disappointing expectations of 0.3%.

At the end of January, a Bloomberg measure of consumer comfort rose to its highest level since July 2007.


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