Aussie Economy survived the night despite Liberal spill
Australia will have a new Prime Minister beginning today after Malcolm Turnbull won a Liberal Party vote against Tony Abbott in a leadership challenge.
It remains to be seen what impact this will have on confidence, although the Australian dollar held up reasonably well overnight.
- The minutes of the RBA board meeting in September provided a broadly mixed assessment of outlook, but the RBA seemed generally optimistic on the global and domestic economies.
- The level of concern regarding global developments has increased a notch, but today's commentary suggests that the RBA is more alert rather than alarmed. Developments in China remain a downside risk. However, for the moment, the RBA is waiting for a clearer read on the outlook.
- The RBA was noticeably more optimistic on the domestic economy, particularly regarding conditions within business and household services. A weaker Australian dollar is likely a major factor behind this view, which is helping to support the economy, and would provide upward pressure on inflation.
- The RBA remains comfortable with the current stance of monetary policy and doesn't seem inclined to lower rates any further over the near-term. We remain comfortable with our view that the RBA will leave the cash rate on hold until late 2016.
Financial markets had a tentative start to the week ahead of a key Federal Reserve meeting.
It remains possible that the US central bank could begin raising interest rates, but it remains a close call. US share markets were slightly lower - the Dow and S&P500 indices both fell 0.4%.
The overnight session followed a drop in Chinese equities yesterday, however Australian shares gained slightly.
US treasuries were little changed ahead as investors await the highly anticipated Federal Reserve meeting.
Markets continue to price in a small chance of an interest rate increase, indicating that any decision from the Fed will trigger a reaction in financial markets.
Australian bond yield futures were similarly little changed. The 10-year yield was steady at 2.73%, while the 3-year yield was up 2 basis points to 1.91%.
The US dollar index tracked sideways, and is holding near a 3-week low.
The Australian dollar strengthened overnight despite lingering concerns over China and the change in leadership overnight. It is currently trading at around 71.4 US cents.
Commodity prices mostly weakened, weighed down by concerns over the economic outlook in China.
Oil and copper prices fell, however, gold prices were supported by the uncertainty ahead of the Federal Reserve meeting later this week.
Industrial production grew by 0.6% in July, following a 0.3% contraction in the previous month. July's gain beat expectations for a 0.3% gain.
Industrial production fell 0.8% in July, down slightly on the preliminary reading of a 0.6% decline. This followed a 1.1% increase in industrial production in June.
For the year to July, industrial production was unchanged, after rising by 2.3% in the year to June.
No major releases to report.