Stocks Down but Dollar Remains Steady

With the offshore markets down yesterday, stocks set off to a slow start. Insiders say that many investors are keeping watch over Germany’s business climate, which has experienced a considerable drop for the last five months from 102.3 points to 101.4 points, and may go on recession.

Bond futures, meanwhile, have gone up despite the change in business confidence towards Germany. Trading for this yielded at 3.095 percent, up from last Monday. The December three-year bond futures contract also went up at 2.500 percent.

Overnight, commodities grew weak as gold, Chine iron ore and oil prices slipped. The BHP is also down in US trade with a loss of 0.81 percent.

Meanwhile, CBA economists have changed their projection on global growth for the rest of the year, citing some new factors to what is considered as “threats” towards recovery.

According to CBA, it has shaved off its global growth forecasts for 2012 and 2013 from 3.1 percent and 3.6 percent. This reflects the slowdown in China and India.

The CBA, however, has assured that despite the forecast downgrade, the major drivers of the global economy remain the emerging companies. The Chinese economy is also expected to stabilize.

There are downside risks to our global growth forecasts. The recent easing of some central banks has reduced these but the biggest risk remains the ‘fiscal cliff,’ which industry observers said could possibily throw the US into another recession.

The scenario is more likely if the US Congress does not amend the law that forces spending cuts by early 2013.

The semi-annual financial stability review from the RBA was recently released where it cited that households have learned to build cushions by paying their credit and mortgages faster and saving. This also indicated that many businesses are willing to lend.

Lastly, the Australian dollar remains steady against the US dollar at $US1.0440, 81.3 yen and 80.7 euro cents.