The Australian market was lower this week in the wake of the U.S. Federal Reserve signalling it may deliver a Christmas rate rise, even in the face of persistently weak inflation in the world’s largest economy. In Australian economic news, investors digested minutes from the RBA which echoed earlier comments that a pick-up in the economy would be sluggish. The RBA mentioned in its September meeting that steady policy is required to “balance the risks associated with high household debt in a low-inflation environment”.

In markets, the best performing sectors were financials, health care and energy which gained ground as the crude oil price held above US$50. The worst performing sectors were utilities, information technology and real estate. Materials were also a poor performer as weaker iron ore prices weighed on the mining sector. The Fed’s signal of a rate move in the near future weighed on the gold price and producers such as Newcrest Mining, Resolute Mining and Northern Star Resources. Mayne Pharma was one of the worst performing companies in the S&P/ASX 200 index despite announcing that it added two speciality products to its Australian portfolio which the company expects will “drive strong growth of our Australian business over the coming years”. G8 Education was one of the best performers following an announcement that the company had acquired 19 early education and childcare centres for $27 million. In global markets, Wall Street was mixed despite the Dow Jones and the S&P 500.

In global markets, Wall Street was mixed despite the Dow Jones and the S&P 500 reaching all-time highs earlier in the week. The U.S. Federal Reserve kept interest rates unchanged at its September meeting but markets are now pricing in a near 64% chance of a December increase. The Fed also said that it plans to start shrinking it’s US$4.5 trillion balance sheet, a legacy of its post-GFC stimulus program, in October. European markets were higher, helped by an increase in annual inflation for the Euro area to 1.5% in August, up from 1.3% in the prior month. UK markets were higher despite the British pound hitting.

European markets were higher, helped by an increase in annual inflation for the Euro area. UK markets were higher despite the British pound hitting 15-month highs against the USD but better than expected retail sales helped. Asian markets were higher despite missile tests from North Korea and bombing drills from South Korea late last week and early this week, heightening geopolitical tensions in the region. The Nikkei 225 was the standout performer as the Japanese yen continued to fall, impacted by the uncertainty created by reports that the Japanese Prime Minister is open to the possibility of a snap election.

The Australian dollar was mostly lower against major global currencies this week with the weaker iron ore price weighing on the currency. The Australian dollar had a volatile week against the USD, rising to US81c mid-week as markets reacted to RBA minutes and USD weakness ahead of the Fed monetary policy meeting. The currency however fell to US79c late in the week as iron ore prices fell.

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