St George Economics economy and finance update
US equity markets edged higher on Friday. Modest numbers for US non-farm payrolls and US factory orders number suggested that monetary stimulus would remain in place while.
The S&P500 rose 0.2% to another record high as did the Dow. European equity markets were mixed with the FTSE100 down 0.5% and the Dax flat.
The softer economic numbers saw US long bond yields fall 11 basis points to 2.60%.
Two year US yields were down 3 basis points to 0.30%. In Australia, 10 year yields pushed up 11 basis points on Friday to close at 3.79%. Three year bond yields also rose, up 7 basis points to 2.58%.
The soft US economic numbers saw the US dollar index fall 0.5% over the weekend, losing ground against all the major currencies.
The AUD failed to push higher against the USD finishing the weekend much where it began on Friday.
The AUD did gain on the NZD following the decision by China to ban imports of NZ milk powder products.
Commodity markets saw limited action over the weekend. The softer US data saw oil and copper fall marginally but gold inched higher to close at US$1311 per ounce.
In the off-chance that you missed the news, the Government has called a Federal election for Saturday 7th September.
The Government released an Economic Statement on Friday with revised Budget estimates for 2013-14 and new economic forecasts.
The Budget deficit originally estimated at $18.0 billion is now projected to reach $30.1 billion.
Economic growth in 2013-14 has been revised down from 2.75% to 2.50% while unemployment is expected to average 6.25% in June 2014, up from 5.75%.
In a further sign that inflation remains subdued, the prices charged by producers (excluding exports) rose by 1.2% in the year to June and rising just 0.1% in the June quarter. Subdued demand and strong competition are keeping price rises to a minimum.
China's non-manufacturing (services) purchasing managers index (PMI) rose from 53.9 to 54.1 in July. The uptick is another signal that China's economic activity is stabilizing at a solid pace of growth.
Eurozone producer prices were flat in June and rose just 0.3% over the year after modestly contracting in annual terms earlier in Q2.
Japan's monetary base grew by 38.0% in the year to July. Japan hopes to kick-start its economy and lift inflation towards 2.0% by increasing the supply of money in the economy.
China has banned imports of milk powder from New Zealand. New Zealand's largest exporter of milk products announced that three batches of their products may have been contaminated.
Milk power is a major export item from New Zealand.
UK house prices accelerated to an annual pace of 3.9% in July, the fastest pace in three years, according to the Nationwide.
Also the UK construction PMI jumped from 51 to 57 last month -its highest since 2010.
US non-farm payrolls rose 162k in July, with the unemployment rate coming in at 7.4%, down from 7.6% in June.
The pace of job growth is consistent with sub-trend but positive growth. The US faces the headwind of a squeeze on government spending due to its debt problems. A separate household survey showed jobs growth of 227k in July providing a more positive read on the US economy.
US factory goods orders rose a weaker than expected 1.5% in June following an upwardly revised 3.0% increase in June.