Morning Report Friday 30 January 2015
The Australian equity market is performing exceptionally at present, up around 1% in recent weeks, while the Dow was down 5% - both at yesterday’s close. At a glance, this would seem crazy as the Bloomberg Commodity Index hit a 12-month low last night (see chart 2), but there are other influences that are very much in play and should not be ignored.
1. The Australian Dollar has fallen 16c (over 15%) in only 5 months, this is making the Australian share market cheap to overseas investors holding $US. Chart 1 illustrates this clearly as the ASX200 in $US is actually falling. Another way of considering this that we all understand is property, Chinese buyers of Australian property often hold funds in $US, hence to them, Australian houses have fallen markedly in the last 5 months - expect solid bidding in 2016. 2. Australian Govt. bond 3 year interest rates this week have fallen below 2%.
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