US and EU markets lack gusto in new year

Share Markets:

US and European share markets continued their soft start to the year.

In Europe, the FTSE100 was down 0.7% while the German Dax fell 1.3%. In the US, the Dow fell 1.0% and the S&P500 was down 1.1%. Unsettling markets have been concerns over the pace of global economic growth and in particular that of China.

Interest Rates:

Despite solid job growth in the US (see below) US long bond yield edged 3 basis points lower to 2.12% on Friday.

With wages growth at just 2.5%, inflation fears in the US remain muted. US 2 year government bond yields fell 2 basis points to 0.93%. In Australia, government bond yields moved higher.

Ten year government bond yields rose 6 basis points to 2.78% while 3 year yields were up 5 basis points to 1.99%.

Foreign Exchange: 

The US dollar index spiked briefly  following the release of the payrolls data (see below) but is now little changed from the previous trading day's level.

The AUD moved marginally off its lows for 2016 in early trade this morning.

The AUD remains under a cloud following events in China over the past week associated with China's management of its sharemarket and its currency.


The price of West Texas crude oil fell to its lowest level in 12 years on solid supply and forecasts of slower global economic growth. Gold, copper and iron ore prices were also lower.


Retail sales rose 0.4% in November to be up 4.3% over the year.

The strongest sales were in those sectors associated with housing activity. An improved labour market appears to be sustaining sales but soft wage growth is keeping a lid on spending. 

The Australian Industry Group's index of construction activity fell from 50.7 in November to 46.8 in December. Strength in the residential construction sector was outweighed by weakness in the engineering and commercial construction sectors.

Lower demand, particularly for mining and heavy industrial construction work was cited in the survey.

New Zealand:

No major data released.


China's consumer price index (CPI) rose 1.6% in the year to December, up from 1.5% in November.

The producer price index (PPI) fell 5.9%, its fifth consecutive decline and maintaining a downward trend evident over the past 46 months.


German industrial production fell 0.3% in November to be up just 0.1% over the year. Germany achieved a surplus trade balance of 20.6bn euro and a current account surplus of 24.7bn euro in November.

United Kingdom:

The UK's achieved a trade deficit of £3.2bn in November, an improvement on the £4.1bn deficit recorded in October. Lower prices for oil lay behind the improvement.

United States:

US non-farm payrolls rose by 292k in December, with November revised higher from 211k to 252k.

The unemployment rate remained at 5.0%, due to an increase in the participation rate from 62.5% to 62.6%.

Wages showed an increase of 2.5% over the year. The data raises the possibility of a rate rise in March.

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