Daily Commentary BY THE CURVE TEAM –

Markets Rebound

31st of October. 2018

Volatility continued overnight with equities bouncing back, bonds selling off while currency markets were mixed. The first of the key local data releases was out yesterday and it was rather underwhelming.

The price action across various markets remains intriguing at the present time with so many different forces pushing and pulling in different directions. The wash up at the close is that US equity markets have finish stronger, bouncing of key technical levels. Bond yields have drifted higher and currency markets are all over the place.

It makes the data to be released over the coming days increasingly important for the near term outlook. As the fear of a meltdown has subsided, expectations of Fed hikes have firmed once again. A lot will depend on the nonfarm payrolls data on Friday night but before we get to that, there is plenty of activity indicators to be released around the globe.

The first of this weeks key local data releases from the ABS yesterday saw building approvals continue to trend lower. The headline result saw overall approvals climb after two months of solid falls as apartment approvals in Victoria spiked. Elsewhere things were far more subdued with private housing approvals still sliding.

Local data will again be in focus today with the Q3 inflation data due along with the latest credit statistics. Both are important for the economic and monetary policy outlook and will warrant close attention.

The key will be in the detail of the CPI data for clues on the shift in discretionary spending from the subcomponents. Meanwhile the credit aggregates will be important, especially for the outlook of house prices.

David Flanagan

Director - Interest Rate Markets