Morning Report Wednesday 23 September 2015
Mining stocks dive, perhaps low interest rates are here for longer
OverviewMining equities plunged again last night as investors again focused on the China slowdown further hurting both emerging markets and commodity prices / demand.
If China slows and commodities remain depressed what is the likely result for interest rates?
Clearly Australian interest rates are at historically low levels (2%) but they remain above the US and Europe and yet we have the problem of plunging commodity prices.
Japanese interest rates have been declining steadily since the glory days of the 70's when official rates were over 8% to basically zero for the last decade!
The decrease in revenue for Australia from the mining sector is a major structural change that may take rates down towards 1% over the coming 12 months but importantly is unlikely to see them higher for the foreseeable future.
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