Party time is back. Yep, the bubble’s popping again, the party hats back on, and the Cup is still eight days away. Markets are already celebrating the latest sugar hit from the European Central Bank and the Chinese central bank. So now the punchbowl is being filled again and, after a miserable 2015, it seems the good times are here again to give us an early Christmas present. As you read this, the Aussie market is back in the green so far as 2015 is concerned. Wall Street went there on Friday night (our time). Anyone who thinks the US Federal Reserve will ruin the party by lifting interest rates this week is kidding themselves.
The European Central Bank last Thursday dropped the biggest hint imaginable about possible further moves to further relax monetary policy on December 3 (more spending and a rate cut); then the late Friday night interest rate cut from China pumped up markets, and it was a very green end of the week. But we should remember the two moves are reactions to fears of slowing economic growth (and returning deflation), not expansion. That’s why the US Fed Thursday morning won’t be cutting rates. A rate riser would cut across these moves and earn the Fed a lot of bad blood around the world. And watch the Bank of Japan on Friday — there are increasing whispers it could produce another round of easing to its existing massive spending plan, as it did a year ago this month. And also don’t forget the Reserve Bank of NZ. Another rate cut is possible Thursday morning — the fourth in a row — to help get the Kiwi economy off the hook of weak dairy prices. — Glenn Dyer
So what about Australia? This Wednesday we get the consumer price data for the September quarter and most forecasts suggest the headline figure will be around 0.6%, quarter on quarter, and 1.6%, year on year, with the underlying figure around 0.5% — and 2.3% yearly. That is exactly where the RBA will want it to be and does allow the bank to cut, if it feels the need next Tuesday (and not because the big four banks have lifted their mortgage rates). The moves by China and the ECB provides the RBA with cover to cut, if it wants to. But it will follow current policy and watch for a month to see what happens in the wake of the decisions from the Fed, the People’s Bank of China and the ECB. — Glenn Dyer
Boo a banker. By the way, if you feel the need to boo, hiss or generally diss the big banks this week, here’s your opportunity. The NAB (Wednesday) and ANZ (Thursday) release their 2014-15 full-year profits and final dividend decisions. So, after their cynical mortgage rate hikes last week, will the duo follow Westpac and show their contempt for customers by lifting dividends to their “suffering” shareholders as well? They will make a lot of money: the NAB around $6.26 billion, and the ANZ $7.29 billion. Poor banks, they are feeling the strain and obviously need a feed!
There has been a lot of loose talk about how the banks are running monetary policy and the RBA is “behind the curve” in the wake of the big four pushing up their mortgage rates. Did those writing such tosh stop to consider that a rate rise might be what the bank wants to see to slow the property lending boom in Sydney and Melbourne? And the same people also forget that the rises will have little or no impact of many people holding mortgages because at least half the number of mortgage holders are repaying loans faster than they should be (and building up more than $200 billion of extra equity) and therefore the increases will be absorbed by their higher repayments, and not from their wallets. —Glenn Dyer
Tech boom redux? Thanks to strong quarterly profit results from Amazon, Alphabet (Google) and Microsoft late last week, American investors have rediscovered the old fashioned tech stock, after being seduced away for much of the past year by the lure of pharmaceuticals and biotechs, and the especially aggressive takeover activity in the sector. But Hilary Clinton put a spoke in that wheel in September when she started questioning the pricing of drugs by some of these high flyers, especially hedge funds and other bottom-feeding scavenger investors, and suddenly those old names are back in vogue. Since US markets bottomed out on August 24-25, shares in Microsoft and Intel have jumped more than 30% (and Microsoft hit a succession of 15-year highs on Friday). Amazon and Facebook shares are up 28% and 23% respectively. In fact, Facebook shares topped US$100 for the first time last week and the others are now hot, hot, hot. But not the mighty Apple — it has languished. Its shares are “only” up 14.8% since August 25 (and more than half of that gain last came with last week’s 7% jump). — Glenn Dyer