Morning Report Tuesday 10th November 2015
When the US starts raising rates what usually happens?
Yesterday was another horrible day for the Australian stock market falling over 1.8% led by BHP falling 5.6% to its lowest level since it reached $20 on 21 November 2008! At11.30 am strong jobs data was released to the market reducing the chances of a near-term rate cut for Australia and adding some fuel to the poor market sentiment.
The market also had to contend with a Santos $2.5bn capital raising with shareholders likely to see their stock fall under $5.50 when it reopens. Yet directors rejected a takeover bid at $6.88 in October....... again who are the directors looking after?
With a 180 point (1.0%) fall on the Dow last night it is likely our local market was accurately pre-empting some weakness in the US. Since Friday’s very strong employment confirmed the strength of the US economy the financial press have been full ahead on a US rate rise for December. What's important is to consider the likely ramifications for markets if / as we enter a new interest rate cycle in the US.
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