Overnight US equities rose further, setting yet another record. But a better perspective is that the US Dow Jones index has just regained its level at the height of the internet bubble. The Nasdaq index, if memory serves, was then around 5000, whereas now it is only 2200. Wall Street was boosted overnight by news of a rise in crude oil inventories, and investors were also heartened by news that Saudi Arabia said it wanted to keep prices lower.

US consumer confidence seems to have stabilised – with the depressing effects of falls in housing prices offset by lower petrol prices and the emerging view that US interest rates have peaked. The latest ABC News/Washington Post Consumer Comfort Index fell one point to -13 on its scale of 100 to -100, just below the 2006 average of -12.

The RBA held interest rates at 6% following its board meeting earlier this week. However, Henry believes at least two further rate hikes will be needed, although recent global developments may provide some breathing space.

The relevant breathing space is provided in large part by what is now a dramatic fall in the price of oil. One of the costs of this is that people who were beginning to rein spending on petrol (and thus their contribution to global warming) may be tempted to go back to their profligate ways. With Australia facing what one expert described to Henry as a “500 year drought,” cheap petrol is the last thing we need. (Gentle readers – please do not send abusive emails in response to this point, it is in fact what might be called an “inconvenient truth”.)

The dramatic change in views about global warming, shown for example in the recent Lowy Institute survey, is one of the biggest changes in public perceptions in a short period that Henry can recall. Must see Al Gore’s movie.

Read more at Henry Thornton.