European markets hurt by politics and petrol

Share Markets:

European markets were soft overnight with the FTSE100 down 0.3% and the German Dax down 1.0%.

Political uncertainty in Spain and weaker oil prices weighed on European markets. 

In the US, the weakness of the past few sessions was halted with the Dow up 0.7% and the S&P500 rising 0.4%. The US market was boosted by a lift in Apple while healthcare and technology stocks also saw improvement.

Interest Rates:

US 10 year government bond prices rose marginally (yields fell) while 2 year and 3 month yields were steady.

There was little movement in Australian yields yesterday and overnight, 10 year Australian government bond yields implied by futures were also little changed.

Atlanta Fed President and member of the FOMC commented on interest rate policy yesterday saying "Moving up gradually means not at every meeting".

Lockhart also said the more probable pace of upcoming hikes "will be more like every other meeting". The FOMC meets eight times a year.

Foreign Exchange: 

The US dollar index was weaker overnight as traders expected the US Fed to refrain from lifting the US Fed funds rate until well into 2016. The Australian dollar gained against the UK pound and was steady against the NZD.

Commodities:

The price of West Texas Intermediate light crude oil fell further overnight amid speculation that suppliers from the Middle East will continue to battle for market share.

The price of Brent crude oil is now at its lowest since mid-2004. Gold and copper were firmer overnight while the price of iron ore edged up to $US40.46 per tonne.

Australia:

No major data released yesterday.

China:

No major data released.

Europe: 

Spain's two biggest left-wing parties ruled out supporting a government led by the ruling People's Party (PP) on Monday, complicating Prime Minister Mariano Rajoy's efforts to build a coalition to stay in power after a tight general election.

Parties began staking out positions for what are expected to be weeks of complex talks on forming a government after Rajoy's centre-right PP won most votes in Sunday's election but fell well short of the 176 seats needed for a parliamentary majority.

Consumer confidence in Europe lifted in December to -5.7 from -5.9 in November and -7.5 in October. Lower oil prices are likely to have helped lift sentiment during the European winter

New Zealand:

Westpac consumer confidence rose to 110.7 in Q4, from a three-year low of 106.0 in Q3. The index remains below its long-run average, but above a 'neutral' reading of 100, indicating that optimists outnumber pessimists.

United States:

The US Chicago Fed Index of National Activity slipped to -0.3 in November. This followed a reading of -0.17 in October. A reading below zero indicates below trend growth in the national economy and could suggest that the Fed will be cautious in its approach towards lifting the Fed funds rate.



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