Been a busy 24 hour period for data and comments from ruling parties across the globe. In response to falling metal prices and slower global growth the Australian central bank (RBA) cut their interest rates by 25bps to bring it down to a mere 3% the second time it has touched this low point in the last four years. So a little bit of relief for mortgage owners down below in a hot property market. They did seem to indicate they were happy with this level for the foreseeable future adopting a wait and see approach presumably on outcome of any fiscal cliff resolution in the US. Many still expect the rates to drop as they still represent some of the highest rates seen amongst a major developed economy, and even Goldman Sachs yesterday were promoting their “trade of the year” to be short AUD vs NOK mainly arguing that NOK interest rates need to rise to cool off a blazing property market and AUD rates need to drop on slower global growth.
Elsewhere in China the new politburo signalled that they were standing firm and continuing with urbanization policies so both banks and property stocks took off like a rocket in their last session dragging some global indexes higher also. This is a positive but not a massive shock in that most know China are committed to urbanizing and expanding its just nice to know for official that the new regime are behind the idea and no nasty surprises are on the cards.
In the UK chancellor of the Exchequer George Osborne was speaking and delivering the annual budget today. Main points to note were that he is dropping corporate tax on UK businesses but offsetting with an increase in bank levy so no net change in revenues there but also that austerity measures and spending reductions which to date have made him a very unpopular man will continue through to 2018 a further three years than originally planned. Also stepping up efforts to clamp down on tax evasion.
In the US still further mud-slinging going on in the fiscal cliff issue and Obama standing firm so far on his promise to increase taxes on the wealthy, two data points to note showed the US added 118k jobs to the ADP employment payrolls figure for private business, slightly less than the 125k expected. Also productivity showed at a two year high but sadly at the expense of unit labour costs which were worse than expected….so basically less people working harder.
Press will be full of it today but here is a early reaction to Osborne speech today. He will obviously be trumpeting his cut to corporate tax to try and avoid the negative headlines surrounding austerity.