Business confidence down for now but change expected


The quarterly NAB business survey saw confidence edge down 1 point to 4 in the March quarter and current business conditions also fell one point to 9. 

However, there was some more positive news in the detail. Businesses expectations for conditions over the next 3 months and 12 months improved, suggesting a better view on the outlook. 

There was also good news for business investment and the labour market. The index measuring capex plans over the next 12 months lifted to 24 in the March quarter, which was the highest since 2011.

Share Markets:

The winning streak in the US share market faltered overnight.

The raft of earnings results disappointed and a pullback in oil prices weighed on energy stocks. The Dow fell 0.6% while the S&P500 dropped 0.5%. 

Interest Rates: 

Despite the lift in risk aversion, US bond yields edged slightly higher overnight. This might have reflected US data indicating further improvement in the labour market.

The 10-year yield lifted 2 basis points to 1.86%.

Australian 3-year bond yields (based on futures) edged up 1 basis point to 2.01% and the 10-year yield lifted 2 basis points to 2.61%.

Foreign Exchange:

The US dollar index edged higher, after a brief dip around the ECB meeting.

The euro initially spiked, but then weakened as ECB president's Draghi's comments were taken as a dovish sign.

The yen strengthened as risk appetite weakened. The more risk averse environment saw the AUD weaken, which shrugged off a surge in the iron ore price. After trading above 78 US cents for most of yesterday, it dropped to around 77.4 cents this morning.


Commodity prices very mixed. Oil prices dropped on indications that Russia and OPEC nations will raise output.

However, there were strong gains in prices of other commodities such as copper, iron ore and grains. The resurgence might suggest a broad pickup in Chinese growth amid stimulus measures from authorities.


The European Central Bank (ECB) left monetary policy unchanged as expected.

President Draghi continued to reiterate that the ECB would be ready to act if necessary, but emphasised patience for inflation to pick up.

The ECB appears to have moved to a stance of wait and see and allow time for previous monetary policy stimulus to do its work. Draghi's comments suggested he was optimistic that measures have been effective in easing financial conditions.

However, risks to the outlook remained "tilted to the downside".

On the rates outlook, Draghi said that "we continue to expect them to remain at present or lower levels for an extended period of time" leaving the question of lower rates more open than previously. In contrast, Draghi's earlier suggested that interest rates would not fall any further.

United Kingdom:

Retail sales slumped 1.3% in March, more than an expected drop of 0.1%. When excluding fuel, sales fell by 1.6%.

The uncertainty surrounding the "Brexit" referendum is evidently having a negative impact on consumer sentiment and spending.

United States:

The range of US data overnight was mixed, but continued with similar themes as in recent times - manufacturing activity is continuing to struggle, but the labour market is improving further. 

The Chicago Fed national activity index fell to -0.44 in March, following a -0.38 reading in the previous month, which is based on an average of 85 indicators to gauge overall economic activity.

The Philadelphia Fed index slipped back into negative territory in April at -1.6 following a reading of 12.4 in March.

The index has been negative in seven out of the last eight months.

Jobs data however, continued to be positive. Initial jobless claims edged down from 253k to 247k for the week ending 16 April, the lowest weekly claims since 1973. The four-week moving average slipped from 265k to 261k, and suggests that the labour market is continuing to improve.

FHFA house prices rose 0.4% in February, which was in line with expectations.

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