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Risk sentiment recovered overnight with virus/vaccine news flow being net positive

The US CDC has just identified the first case of Omicron in the United States – joining the UK, Switzerland and Brazil overnight – at a time when US infection rates of the delta variant had already started creeping back up.

It has been a volatile session overnight driven by differing headlines around vaccine efficacy, capped off by very significant hawkish tilt by US Fed Chair Powell in Senate Testimony.

Global markets have seen a modest retracement of many of last Friday’s violent ‘risk-off’ moves, with equities higher in Europe, so too US government yields up, as too is oil, but in all cases to nowhere near Friday’s closing levels.

Omicron uncertainty triggers a rethink on the global economic outlook

BoE’s Bailey still guiding that rates will need to be higher ahead of the Dec MPC meet.

Dovish Fed Official (Daly) flips to looking at accelerating tapering and to hikes in 2022

NAB Group Chief Economist Alan Oster talks about the latest economic news. Listen now.

Eurozone PMIs spring upside surprise, supporting EUR and holding USD in check

Ahead of a speech by President Biden later today on the economy and inflation, we got news that Jay Powell is to be re-appointed to a second term as Fed chair.

Rising COVID infections around Europe and news that Austria will go into lockdown rattled markets on Friday with 10y Bunds leading a decline in core global bond yields.

Fed speak was not market moving, but it is worth noting it is mostly turning slightly hawkish.

Some in the market were positioned for an upside surprise in Australian wages data, but that wasn’t forthcoming, with the data bang in line with expectations at 2.2% y/y, back to pre-pandemic levels.

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