ep 396 | The week ahead - Have oil and inflation forced the Fed's hand?
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What is the main topic discussed in this episode?
On point with Craig's Investment Partners. The information provided here is general in nature and it's not financial advice. It doesn't take into account your situation, objectives, goals, or risk tolerance. All investments are subject to risk and none are guaranteed. Before you make any investment decisions, we recommend you contact an investment advisor. For more information about our services or to view the Craig's Investment Partners Financial Advice Provider Disclosure Statement, please visit. our website which is craigsip.com. Welcome to On Point. I'm Mark Lister, Investment Director at Craig's Investment Partners, and I'll be talking about a range of topics including economics, portfolio strategy, investor education and anything else that's happening out there in financial markets.
Hey team, hope everyone is well. Feels like I haven't spoken to you all for a long time. Uh it was a week ago that we did one of these sessions. I actually skipped the midweek episode that I usually do. Because I was tied up with Ames Games last week. So back on deck now and ready to talk about last week and then take a look ahead to what is coming up. Global financial markets had a rough week last week. We've seen an escalating situation in the Middle East. We've seen oil prices push back over $100 a barrel, and rising bond yields have continued to pressure asset prices. So the escalating The SP 500 index in the US slipped 0.8% last week. We also saw share markets in the UK, Europe, and Japan all fall 1.7, 1.8%.
Emerging market equities slipped back 0.3%, while the Australian market, the ASX 200, finished the week 2.9% lower. A big fall for the Australian market. The local NZX50 index fell 2.8%. That was its biggest weekly decline since late 2022. Now there was a better day in the US on Friday. We saw some positive news come through and oil prices came back a little bit. The Oracle result was taken very well. That sort of eased some of those concerns about AI investment and so forth. New Zealand and Australia were closed.
What were the biggest market moves and why did global equities slide last week?
So maybe that is why we fell a little bit harder when we look back across the whole week. So we might play a bit of catch-up on Monday morning and see a slightly more positive session after that better trading session in the US on Friday. But that is how things developed over the course of the entire week. Also important to note that the Kiwi dollar fell against most other. Currencies last week. So we were down what a little more than one percent against the greenback, about the same against the pound, same against the euro. Uh off quite a bit against the Japanese yen. We're off almost three percent against the yen. So what that means is that some of those equity market declines across the world were offset by a weaker currency.
So the US, for example, the SP 500 was down in US dollar. In local currency, but it was up in New Zealand dollars. Same goes for the Japanese Topics Index, which was down 1.8%, but in New Zealand dollar terms, up 1%. So maybe your Kiwi Saver account or your investment account is actually not looking too bad because of that New Zealand dollar weakness offsetting, what we saw internationally. US crude oil, like I said, it was up, jumped another 9% at closed. closed at more than a hundred dollars a barrel for the first time since May. That's helped push bond yields higher. It's not the only reason that bond yields are going higher, but we saw the US 10-year Treasury yield rise from 4.8% to almost 5%. So very close to that 16-year high of just above 5% that we saw about three years ago.
Here in New Zealand, our five-year swap rate surged 32 basis points, finished at a two-year high of 4.42%. That was actually the biggest weekly move that we've seen since early 2024. And on the back of all that, we've seen pricing for an October OCR hike jump to a little more than 60%. So quite a lot going on in the world of interest rates, bond yields, and central banks. Right, looking back at some of the key data releases, and in Europe, there was a monetary policy decision from the central bank over there.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:00–2:13
2
What were the biggest market moves and why did global equities slide last week?
2:13–5:27
3
How did rising oil prices and bond yields affect New Zealand investors?
5:27–8:34
4
What did the ECB’s latest rate decision reveal about Europe’s inflation outlook?
8:34–9:49
5
How is US inflation trending and what does it mean for the Fed’s policy path?
9:49–10:50
6
Why are market participants pricing an 86% chance of a Fed rate hike this week?
10:50–12:09
7
What key economic releases are on the calendar for New Zealand this week?
12:09–12:22
Speakers
1 identifiedMore from On Point
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ep 391 | The week ahead - Rising bond yields rattle global markets
ep 390 | Are sharemarket valuations too high?