Business confidence was on the rise before recent turmoil

Share Markets:

Share markets had a quieter session after the wild swings over the past few days.

There was less of a clear direction overnight. Share indices in Europe gained with the German DAX the exception. US shares tracked sideways.

The Dow ended 0.5% higher, and the S&P500 edged up 0.2%.

Interest Rates: 

US bond yields fell following a batch of weaker US economic data. The 10-year yield dropped 3 basis points to 1.85%.

Markets are pricing in just a 5.8% chance of a Fed rate hike in March and a 40.6% chance by the end of the year.

Australian bond futures were little changed, with 3 and 10-year implied yields at 1.85% and 2.58%, respectively.

Foreign Exchange:

The sell-off in the US dollar continued - the dollar index fell to a three-month low following some dovish comments from Fed Kaplan and soft US economic data.

The AUD popped above 72 US cents on US weakness, settling at around 72 US cents at the time of writing. There is plenty of event risk over the next 24 hours including the RBA's Statement on Monetary Policy and US nonfarm payrolls tonight.

Commodities:

Oil prices were down marginally in volatile trading.

Prices of other commodities gained strongly including gold, benefiting from the weaker US dollar. 

Australia:

The NAB quarterly business survey revealed a lift in confidence from 1 in the September quarter to 4 in the December quarter.

Current conditions edged down from 10 to 9. The survey predates much of the recent financial market volatility which could have a detrimental impact on confidence.

The industry breakdown from the survey however, continued to reveal a pickup in conditions of personal services.

United Kingdom:

The Bank of England (BoE) left official interest rates unchanged at 0.50% in a unanimous decision.

The lone dissenter in prior meetings, Ian McCafferty who had voted for a rate rise, now voted for policy to be unchanged.

The BoE lowered its growth forecasts and raised concerns regarding China and financial market turmoil.

Slower wage growth and inflation also weighed on the outlook. However, Carney continued to insist that "more likely than not, the next move is up".

United States:

Initial jobless claims edged 8k higher to 285k for the week ending 30 January. Claims are still below 300k, which signals a healthy pace of employment growth, although they have edged higher in recent weeks.

Other data signalled some weakness towards the end of the year. Factory orders fell 2.9% in December following a 0.7% decline in the previous month.

Durable goods orders also declined, dropping 5.0%. Both were slightly weaker than consensus expectations. The fall in activity reflects softening manufacturing activity which has been weighed down by the strong US dollar.

Dallas Fed President Kaplan added to the dovish comments of Fed officials, signalling the Fed could delay raising rates. Kaplan said that it was "a time for patience and analysis" and that financial conditions had tightened.



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