Australian Markets Weekly: 12 September 2016

The most market-sensitive events this week are an RBA speech Tuesday morning, the NAB Business Survey (also Tuesday) and the latest Labour Force statistics on Thursday.


Volatility up ahead of FOMC; Sydney/Melbourne housing price momentum evident but not uniform.

  • This week, we take a closer look at recent housing market developments.
  • Weekly CoreLogic prices for Sydney show prices continuing to make some net gains (+2.0% over the past four weeks, +10.8% y/y) and Melbourne (+2.3%, +10.3%, respectively) with still high auction clearance rates (~80%). Prices in Brisbane-Gold Coast have been flatter of late as they have in Adelaide, though both show prices are still higher over the past year, by 4.7% and 3.9% respectively. In Perth, prices remain languid, relatively flat overall over recent weeks but down 4.3% over the past year.
  • In Sydney, price gains appear to be tilted to higher-priced suburbs surveyed for this report, possibly with lower auction volumes than last year also a contributing factor.  There are some tentative signs that prices may be flattening out in some of the lower priced/outer-Sydney suburbs.
  • In some contrast, Melbourne prices in several of the surveyed lower priced/outer suburbs look so far to have retained a greater degree of resilience with inner/more expensive locations mixed.
  • Offshore stock market volatility rose on Friday night, with the S&P 500 VIX volatility index up 40% from 12.5 to 17.5 as market jitters rose on heightened talk that next week’s FOMC could be “live”. Bond and swap yields rose sharply.
  • The USD was stronger, the AUD losing some ground (as it usually does on increased market volatility), trading at US$0.7540 at the start of the week. This also occurred in the wake of ECB President Draghi being relatively comfortable about how the ECB’s Asset Purchase Program is supporting bank lending. In other words, no hint of any easing.
  • The week ahead: Three more Fed speakers are scheduled tonight, ahead of the usual pre-FOMC media lock down. One speech tonight under particular scrutiny, will be that from the usually-dovish Fed Governor Lael Brainard, who was very cautious about further tightening last time she spoke in early June. There is some speculation as to whether she will be more inclined to vote for a hike next week.
  • After tonight, the focus will return to local markets with the key NAB Business Survey and the RBA’s Assistant Governor (Economic) Chris Kent speaking tomorrow and then the latest Labour Force data on Thursday. Offshore, the key focus is tomorrow’s key monthly China activity data.

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