Weekly market wrap up - 15 November 2024
Oil prices have slipped this week, with Brent crude trending towards US$70/bbl, a level that has acted as something of a price floor in recent months. Current prices are more than 20% below the lofty heights above US$90/bbl achieved in April. The most recent decline has been attributed to OPEC’s downward revision of demand growth, a stronger US dollar, and the prospect of increased global supply following the US presidential election. Pledging earlier this week to “drill, baby, drill”, the potential actions of the incoming President are acting as something of an anchor on price action. An attempt at offsetting action by OPEC, delaying its scheduled production increase, has so far proved to be insufficient to slow the slide.
If the suppression of oil prices can be sustained, it may act to assist the RBNZ, and other global central banks, in maintaining their inflation objectives.
Spring has brought renewed optimism to New Zealand's property market, according to the latest figures from the Real Estate Institute of New Zealand (REINZ). October saw a notable increase in property sales and a slight rise in median prices, signalling a recovery from a previously subdued market. Nationally, sales surged compared to last year, with several regions showing significant improvements. Inventory levels increased, reflecting a more active market and improved seller expectations. In terms of transaction mechanisms, auctions gained traction, making up a larger share of total sales.
As house prices are highly correlated to consumer sentiment, and consumer sentiment is a driving force behind economic activity, the economic outlook is a little brighter.
US consumer prices rose as expected in October, driven by higher shelter costs, indicating that progress towards achieving target level inflation has slowed. At a headline level, the Consumer Price Index ticked up to 2.6% (year-on-year) from 2.4% in September. Digging into the detail, core inflation, a metric that excludes food and energy, remained steady at 3.3%. Despite this, the US Federal Reserve is still expected to cut its cash rate in December, though the market expects the pace of cutting will slow in the new year. The report comes amid heightened economic uncertainty following Donald Trump's presidential election victory, which is currently expected to bring tax cuts and trade tariffs, both of which have the potential to bring about inflationary pressures.
With inflation progress stalling and the economic and political environment evolving, the US Federal Reserve faces fresh challenges heading into 2025.
Australia’s robust employment market wobbled slightly in October, with job growth slowing to a net rise of 15,900 from September’s turbocharged 61,300. Providing further numerical context, October’s increase was the smallest job gain in seven months and fell short of market expectations of a 25,000 rise. Despite the swings in job numbers, the unemployment rate remained steady at 4.1%, a level that, while elevated relative to the COVID-era, is still low from a long-term historical perspective. The slightly mixed messaging from the jobs data was not viewed as sufficient to prompt the Reserve Bank of Australia to ease interest rates at its 10 December meeting.
The market continues to believe Australian borrowers will have to wait until 2025 for cash rate relief.
Authors: Sam Duncan, Ben Bridgman and Ganan Jeyakumar
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