Mining decline has accelerated but others pick up slack

Share Markets:

European share markets extended a two-month high overnight. One of the key European bourses, Germany's DAX shares index, rose for an eleventh day after Germany's jobless rate hit a record low.

At the close, Germany's DAX was 0.6% higher, the UK's FTSE 100 closed down 0.1%, the French CAC 40 rose 0.2% and the Euro Stoxx Index was up 0.6%.

Wall Street was closed for the Thanksgiving holiday.

Interest Rates:

US treasury yields fell slightly further via the futures markets. Australian 3-year government bond future yields initially extended the post-capex bounce to 2.48%, but reversed in early London to 2.44%. Australian 10-year yields also reversed from 3.14% to 3.12%.

Foreign Exchange:

The US dollar index gained around 0.5% overnight. EUR/USD fell from 1.2524 to 1.2465. USD/JPY bounced off 117.26 to 117.88.

AUD/USD extended its post-capex gains to 0.8614 before reversing early London to 0.8536.

NZD also reversed from 0.7927 to 0.7859. AUD/NZD ranged sideways between 1.0850 and 1.0885.


OPEC decided not to reduce supply. Brent crude oil futures dropped 6.6% overnight to a four-year low in response.


Private business spending (i.e. capex) rose 0.2% in the September quarter, following an upwardly revised 1.6% increase in the June quarter.

The back-to-back positive growth over the last two quarters is encouraging, given the accelerating decline in mining investment.

Mining investment grew at its weakest annual pace in 14 years.

We are slowly seeing an improvement in the non-mining sectors of the economy, which is helping to offset the decline in mining investment, and suggests that "animal spirits" may be building as the Reserve Bank hopes.

Growth in non-mining was 12.0% in the year, the strongest annual growth in six years.

HIA new home sales rose 3.0% in October, following a flat outcome in September.

The increase was driven by non-unit sales, which rose 6.0%. Unit sales fell 10.5% in the month.


The German HICP annual inflation rate dropped to 0.5% in November, from 0.7% year-on-year in the previous month.

The national CPI rate declined to 0.6% year-on-year in the same time period.

The numbers, coupled with the decline in the Spanish HICP to -0.4% year-on-year point to a sharp dip in Eurozone headline HICP, released tomorrow.

This data then adds to the arguments of the doves at the European Central Bank (ECB) and pressure on ECB President Draghi to do more to support the economy and fight deflation dangers.

German jobless data was better than expected. The headline number fell 14K over the month against expectations for a drop of 1K. Moreover, the jobless rate unexpectedly dropped to just 6.6% in November.

The ECB President did not add any further details regarding the discussion on quantitative easing at the central bank.

Draghi stuck to the script and said there are indications that current stimulus measures are having tangible benefits.

He added that "time is needed for the positive effects to fully materialise". He also repeated that if necessary "the Governing Council is unanimous in its commitment to using additional unconventional instruments within its mandate".

New Zealand:

The trade deficit narrowed from $1.4bn to $910mn in October, but was larger than consensus estimates of $642mn.

The annual trade balance is now in deficit, the first in ten months. Exports were down 5.1% in the year, largely reflecting weaker dairy exports. Imports were 11.9% higher in the year to October.

United Kingdom:

Lloyds business barometer rose to 42 in November, from 35 in October.

United States:

There was no data released overnight due to the Thanksgiving holiday.

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