As predicted the RBA leaves Australia’s base rate at 2.5% whilst Spain’s unemployment falls slightly

Mar 4 • Between the lines • 2216 Views • Comments Off on As predicted the RBA leaves Australia’s base rate at 2.5% whilst Spain’s unemployment falls slightly

shutterstock_178472612In the overnight/early morning trading session the RBA announced that they were keeping the base interest rate at 2.5% whilst governor Stevens at the bank, in what may be code, stated that the central bank believes that the current conditions overall remain “very accommodative”. This could suggest that further monetary easing is still on the table and that medium term that base rate could be shaved a decimal point or two given how out of step with other leading economies it is.

In other Australian news buildings approved rose 1.3% in January and have risen for 15 months. The seasonally adjusted estimate for total dwellings approved rose 6.8% in January after falling for three months.

Spain’s unemployment data has been printed and on the face of it it’s encouraging with the data showing the first improvement in February in over four years. However, with circa 65% youth unemployment and close on 30% unemployment overall, it’s far too early to begin any celebration.

Markit economics published its survey results on the UK’s construction output and in what is a habit with Markit they’ve published an incredibly bullish report, with a stand out title, which ignores the fact that the PMI number is down on the previous month, by circa two points and missed analysts’ expectations by a full point.

Overall, the announcement that Russia appears to have paused its military incursions into the Ukraine, added calm to the European bourses in early trade with many indices having recovered approximately half of the ground lost during the sharp selloff witnessed yesterday. However, the overall crisis appears to be far from over.

Spanish Registered unemployment falls in February for the first time since the start of the crisis

Registered unemployment in February declined by 1949 compared with the previous month and the total number registered unemployed by the Public Employment Services is now at 4,812,486. This is the first decline in registered unemployment in February from the start of the crisis. The Secretary of State for Employment Engracia Hidalgo recalled that in the last 5 years, “the registered unemployment in February had grown by an average of 95,233 people.” During the last twelve months registered unemployment has decreased by 227,736 people.

UK construction output rises sharply, but pace of expansion eases

Construction companies indicated another strong overall performance in February, despite output and new business growth easing since the previous month. Job creation meanwhile hit a three-month high and firms remained highly positive about their expectations for business activity over the year ahead. Adjusted for seasonal factors, the Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) posted 62.6 in February, down from a 77-month high of 64.6 in January. The index has posted above the 50.0 no-change level in each month since May 2013.

Australia Building Approvals

The trend estimate for total dwellings approved rose 1.3% in January and has risen for 15 months. The seasonally adjusted estimate for total dwellings approved rose 6.8% in January after falling for three months. PRIVATE SECTOR HOUSES The trend estimate for private sector houses approved rose 2.0% in January and has risen for 13 months. The seasonally adjusted estimate for private sector houses rose 8.3% in January following a fall of 1.9% in the previous month. PRIVATE SECTOR DWELLINGS EXCLUDING HOUSES The trend estimate for private sector dwellings excluding houses rose 0.6% in January.

RBA Statement on Monetary Policy

At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent. Growth in the global economy was a bit below trend in 2013, but there are reasonable prospects of a pick-up this year. The United States economy, while affected by adverse weather, continues its expansion and the euro area has begun a recovery from recession, albeit a fragile one. Japan has recorded a significant pick-up in growth, while China’s growth remains in line with policymakers’ objectives. Commodity prices have declined from their peaks but in historical terms remain high. Financial conditions overall remain very accommodative.

Market snapshot at 10:00 am UK time

European equities have made up a significant proportion of their last ground from yesterday as the military incursions in Ukraine by Russian forces appears to have paused. Euro STOXX is up 1.23%, CAC up 1.22%, DAX up 0.91% and the UK FTSE up 1.09%. The ASX 200 closed up 0.30%, the CSI down 0.28%, the Hang Seng up 0.70% and the Nikkei up 0.47%. Looking towards the New York open the DJIA equity index future is up 0.68%, SPX up 0.61% and the NASDAQ future is up 0.67%.

NYMEX WTI oil is currently down 1.12% at $103.74 per barrel with NYMEX nat gas up 0.65% at $4.52 per therm. COMEX gold is down 0.84% at $1339 with silver on COMEX up 0.18% at $21.28 per ounce.

Gold futures for April delivery gained 2.2 percent yesterday to $1,350.30 on the Comex in New York, after touching $1,355, the highest since October. The contract dropped 0.5 percent to $1,343 early in Singapore today. The April $1,400 call surged 240 percent yesterday to $5.10. Gold traders are setting their sights on $1,400 an ounce, a price not reached since September, as the standoff between the West and Russia increases demand for the metal as a safe haven.

Forex focus

The yen fell 0.6 percent to 140.18 per euro early in London. It slid 0.4 percent to 101.87 per dollar after reaching 101.20 yesterday, the strongest level since Feb. 5th. Europe’s single currency advanced 0.2 percent to $1.3758. The yen weakened against all of its 16 major peers after Interfax reported that Russia ended military exercises in its western area as scheduled amid rising tensions in Ukraine’s Crimea region.

Australia’s dollar was little changed at 89.41 U.S. cents after sliding to as low as 88.91 yesterday, a level not seen since Feb. 5th. The Reserve Bank left its benchmark interest rate unchanged (at a record low) in order to spur domestic industries and offset a slump in mining investment.

The decline in the exchange rate seen to date will assist in achieving balanced growth in the economy, though the exchange rate remains high by historical standards.

RBA Governor Glenn Stevens said in a statement accompanying the decision.

The Bloomberg Dollar Spot Index, which tracks the greenback against its 10 major counterparts, was little changed after rising 0.2 percent yesterday. A U.S. government report due March 7th will probably show non-farm payrolls rose 150,000 in February, up from a 113,000 increase the prior month, the median estimate of economists shows.

Bonds briefing

Australia’s benchmark 10-year yield rose two basis points to 4.01 percent. The yield on debt due in three years, among the most sensitive to interest-rate expectations, climbed five basis points to 2.83 percent after dropping to as low as 2.76 percent yesterday, the least since Sept. 30th.

U.S. 10-year yields rose three basis points, or 0.03 percentage point, to 2.63 percent early in London from yesterday, when they touched 2.59 percent, the lowest level since Feb. 4th. The price of the 2.75 percent note maturing in February 2024 fell 7/32, or $2.19 per $1,000 face amount, to 101 2/32. Treasuries fell, paring their biggest gain in more than two weeks yesterday; as risk aversion eased after Interfax news service reported Russia’s President Vladimir Putin ended military exercises in the country’s western region.
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