Further concerns over European markets weighed on the Australian share market in November.
The All Ordinaries Index fell 1.2% to close at 4,676.4 points. Global markets (with the exception of Japan) also fell in November with the Dow Jones Index falling 1.0%, the FTSE falling 2.6%, and the Hang Seng falling 0.4%. The Nikkei 225 Index gained 7.7% for the month.
The European Union agreed to an official rescue package for debt-ridden Ireland in late November. Although this did little to ease the market's worries about the health of other eurozone economies (namely Spain and Portugal).
Although it must be noted that, globally, sharemarkets have reacted much more rationally in relation to the latest round European concerns (compared to earlier this year when the concerns of Greece first emerged).
The Australian sharemarket has shown good support at 4,550 points. Provided this support remains, a rally leading up to Christmas is not out of question. However, from a technical perspective if the market breaks below this level there may be some more short-term weakness.
In the United States, the US Federal Reserve released its long anticipated second round of monetary stimulus – known as QE2. The US$600 billion print-money-and-spend-it plan (called QE2 because it is the second attempt since the global financial crisis at a strategy known as quantitative easing) is the latest target in attempts to get the US economy kick started.
The idea is that if the US Federal Reserve puts more money into circulation by repurchasing from banks their holdings of US government securities, the banks will in turn lend more money to struggling businesses and home buyers.
Not only is there doubt in the US that the plan will work, or is the stimulus that the banks need to provide cheaper loans, other nations see the move as a de facto devaluation of the US dollar so its exports become cheaper and more attractive in other countries.
The Australian Dollar has fallen in light of the renewed European economic concerns. The Australian Dollar is currently buying US0.9752 cents.
The Reserve Bank of Australia increased interest rates by 25 basis points on November. The official cash rate now stands at 4.75% per annum. CBA was the first bank to hike mortgage rates above the official interest rate increase (40 basis point increase), although other banks followed suit shortly thereafter.
Most economists now expect interest rates to remain on hold for the next few months.
For more information please contact Ryan Love on 1300 856 338 or e-mail ryan.love@apexpartners.com.au.
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