Bank of Melbourne

Morning Report

Main Themes: Investors await the result of the Federal Reserve’s FOMC meeting where an interest rate hike is widely expected. Investors will be focused on Fed Chair Powell’s press conference and the Fed’s projections for guidance on future interest rate moves.
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Main Themes: Investors await the result of the Federal Reserve’s FOMC meeting where an interest rate hike is widely expected. Investors will be focused on Fed Chair Powell’s press conference and the Fed’s projections for guidance on future interest rate moves.

Share Markets: The US stockmarket was mixed. The Dow fell 0.3% and the S&P 500 lost 0.1%, while the Nasdaq rose 0.2% for the session.  

Interest Rates: US government bond yields increased ahead of the US Federal Reserve FOMC meeting, where it is widely expected to raise official interest rates. Soft demand at the Treasury US$38billion 5-year note auction put upward pressure on yields. The yield on the US 10-year government bond rose from 3.09% to 3.10%. The yield on the US government 2-year bond rose from 2.82% to 2.84%.

Foreign Exchange: The US dollar drifted lower ahead of the Fed meeting, where a rate hike is fully priced by markets. The Euro and Sterling gained against the dollar, while the Yen weakened.

The Australian dollar is little changed from yesterday morning. AUD/USD see-sawed between 0.7263 and 0.7236 and is trading around 0.7250 at the time of writing. The New Zealand dollar gained against the Australian and US dollars.

The Argentine peso and government bonds came under pressure following the resignation of central bank governor Caputo, after three months in the role. Former Economic Policy Secretary Sandleris has been named as the new central bank governor.

Commodities: The oil price was initially boosted on concerns about supply ahead of US sanctions on Iranian oil exports. In a speech before the United Nations US President Trump said there would be further sanctions on Iran after November. The lift in the oil price was reversed, however, as Trump put further pressure on the Organization of the Petroleum Exporting Countries (OPEC) to increase production. The WTI oil price finished down US$0.50 at US$72.60 per barrel.

Australia: No major data to report.

United States: Consumer confidence jumped to an 18-year high of 138.4 in September, from 134.7 in August. Both the expectations and the present situation component of the index gained in September. Consensus expectations had centred on a decline in consumer confidence.

The Richmond Fed manufacturing index jumped to 29 in September, from 24 in August, defying consensus expectations for a decline.

FHFA home prices rose by 0.2% in July, after rising by 0.2% in August. For the year, home prices have gained 6.4%.

Home prices rose by 0.1% in July, after rising by 0.2% in June, according to the CoreLogic CS 20-city index. Annual growth in home prices eased to 5.9% in July, which was its lowest in almost a year and down from 6.4% in June.

 

Today’s key data and events

US FOMC Rate Decision (4am)

        exp 2.00%-2.25% prev 1.75-2.00%

NZ Trade Balance Aug exp NZ$925mn prev –NZ$143mn (8:45am)

NZ ANZ Business Confidence Sep prev -50.3 (11am)

US New Home Sales Aug exp 0.5% prev -1.7% (12am)

 

Times are AEST. All data forecasts are m/m or q/q and seasonally adjusted unless otherwise specified. Forecasts for Australian data are our forecasts and for other countries they are consensus forecasts.

 

Jo Horton, Senior Economist
Ph:02-8253-6696