Be sure to check out the Economic News - Henry's Views columns for previous months of 2006: August, September.

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Henry, 31/10.  Oil – light, sweet crude down $2.39 to $58.36 per barrel; Gold – up $8 to $609; Dow Jones – down 3.76, to 12,086.50; Australian dollar – being traded at 7am this morning at 76.99 US cents, up from Thursday’s close of 76.91 US cents; and US 10-year bond yields – 4.67% (down 1 basis point).

Henry says: The price of oil plummeted on renewed doubts that OPEC won't be following through on their production cut of 1.2 million barrels a day.  Although Saudi Arabia, UAE and Iran have told some of their customers that they will be cutting production is the coming months, there has been some data released that shows an increase in production.  With prices at these levels, it is apparently just too profitable to keep pumping.

At this stage, it appears that the housing slowdown could be impacting upon consumer spending.  A Commerce Department report found that consumer spending rose by only 0.1% in September, the smallest increase in 10 months.  This was despite personal income rising by 0.5%.  The latest sales report from Walmart, generally considered to be a good barometer of consumer confidence, was also lower than expected.  Sales increased by 0.5% in October, the lowest amount in six years.

Henry, 30/10.  Oil – light, sweet crude up 44 cents to $60.75 per barrel; Gold – up $1.20 to $601; Dow Jones – down 73.40, to 12,090.26; Australian dollar – being traded at 7am this morning at 76.87 US cents, up from Thursday’s close of 76.34 US cents; and US 10-year bond yields – 4.68% (down 4 basis points).

Henry says: US economic growth slowed to its lowest rate in three years, sending Wall St lower on Friday.  GDP expanded by 1.6% during the three months to September, down from 2.6% in the second quarter, and 0.6% lower than economists expectations. The slowdown was due largely to the housing slump - the report showed that spending on new housing contracted by 17.4%, the biggest annual decline for more than 15 years.

The hard/soft landing question has again been raised, and now some economists think that the next move in interest rates will be down - bond yields consequently fell 4 basis points.

Henry, 27/10.  Oil – light, sweet crude down $1.04 to $60.36 per barrel; Gold – up $9 to $599.80; Dow Jones – up 28.98, or 0.24 percent, to 12,163.66; Australian dollar – being traded at 7am this morning at 76.43 US cents, up from Thursday’s close of 76.34 US cents; and US 10-year bond yields – 4.72% (down 4 basis points).

Henry says: Bonds rose yet again on the belief that the US Fed is finished with rate hikes, with the yield falling 4 basis points to 4.72%.  Wall Street extended its rally (more records, yada, yada) on solid earning reports from oil company Exxon (due to high oil prices) and health insurer Aetna.

The Australian dollar opened higher, after a hawkish speech from ECB president Jean Claude Trichet sent currency traders scrambling for euros, moving out of American dollars.

Henry, 26/10.  Oil – light, sweet crude up $2.05 to $61.40 per barrel; Gold – up $3.20 to $590.80; Dow Jones – up 6.80, or 0.06 percent, at 12,134.68; Australian dollar – being traded at 7am this morning at 76.10 US cents, unchanged from Tuesday’s close; and US 10-year bond yields – 4.76% (down 6 basis points).

Henry says: The US Fed decided to leave cash rates at 5.25% for the third straight meeting - but importantly highlighted in the accompanying statement that inflation readings have been a touch too high recently. However, the statement added that the Fed expected inflation to abate, and bonds rallied, with the yield down 6 points.

Oil was up sharply on  a weekly Energy Department report that showed an unexpected drop in crude inventories.  The recent OPEC oil cuts are also adding some upward pressure to prices.

Henry, 25/10.  Oil – light, sweet crude up 54 cents to $59.35 per barrel; Gold – up $4.70 to $587.60; Dow Jones – up 10.97, or 0.09 percent, at 12,127.88; Australian dollar – being traded at 7am this morning at 75.85 US cents, up from Tuesday’s close of 75.73 US cents; and US 10-year bond yields – 4.82% (down one basis point).

Henry says:  The US Fed's two day meeting on monetary policy began last evening, which meant many investors were willing to sit back and wait for the outcome. Regardless, the Dow set both record trading and close levels. Investors also await the Commerce Department report on the broadest measure of the economy, GDP, due Friday.

Be sure to follow Australian Economy and Henry's Blog for real-time analysis of today's CPI data.

Henry, 24/10.  Oil – December contract light sweet crude down 52 cents to $58.81 per barrel; Gold – down $13.50 to $582.90; Dow Jones – up 114.54, or 0.95 percent, at 12,116.91; Australian dollar – being traded at 7am this morning at 75.70 US cents, down from Monday’s close of 76.09 US cents; and US 10-year bond yields – 4.83% (up 4 basis points).

Henry says:  Several strong earnings reports by blue-chip companies have boosted the Dow yet again as it powered through the 12,100 mark for the first time ever.  These blue-chip stocks have been outpacing their smaller rival companies, (thus the strength in the Dow) at least in part because the economic slowdown has sent investors scrambling after the relative safety of the big names.

Oil traders have called the OPEC's bluff, sending oil prices lower overnight while effectively saying "we don't believe you'll cut production". The last time there was a production cut, oil was only half the current price - these oil exporting nations now have far greater incentive to pump as much as is possible.

Henry, 23/10.  Oil – the expiring November Nymex crude contract fell $1.68 cents to $56.82 per barrel; Gold – down $6.10 to $565.40; Dow Jones – down 9.36, or 0.08 percent, at 12,002.37; Australian dollar – being traded at 7am this morning at 75.88 US cents, down from Friday’s close of 76.02 US cents; and US 10-year bond yields – 4.79% (unchanged).

Henry says: OPEC announced a surprise agreement to cut output by 1.2 million barrels per day on Friday, more than the one million cut expected, while they left the door open for further cuts at their next meeting in December.  Prices still fell on the news, apparently because investors severly doubt OPEC's resolve to actually follow through on the cuts.

A big week coming up, with the release of both the US Fed's latest decision on interest rates, as well as the domestic CPI figures, which will very likely indicate what will happen at next week's RBA meeting on interest rates.

Henry, 20/10.  Oil – up 85 cents to $58.50 per barrel; Gold – up $9.90 to $602.50; Dow Jones – up 19.05, or 0.16%, to close at 12,011.73; Australian dollar – being traded at 7am this morning at 75.92 US cents, up from yesterday’s close of 75.66 US cents; and US 10-year bond yields – 4.79% (up 3 basis points).

Henry says:  The Dow finished above 12,000 today for the first time in history.  The prominent index hit its ninth record high in two weeks despite (or because of) signals that the slowdown in the US economy may not be going as earlier thought.  The Conference Board released its index of leading economic indicators, which increased slightly less than expected, while the Philadelphia Fed's general economic index actually contracted.  Also, corporate earnings in the tech sector have been slightly weaker than expected.

("Because of" since markets equate slower economy with lower interest rates, and equity values rise.  But the main point about US equity prices is they are only creeping up, and are not yet much above the previous high water mark of 5 years ago, and in the case of tech stocks much lower. Here endeth today's lesson ...)

In other news, the oil price rose on suggestions that next week's OPEC will lead to a one million barrel a day supply cut.  (See yesterday's comments - do we buy this stuff? I mean the opinions, not the oil, upon which we are hooked.)  But if George Bush has any pull with the Saudis, he'll make sure that they keep oil flowing at full boar (bore? - here at Henry Thornton we are not great spelers) so that there's no petrol price hike during mid-term elections - everyone knows high petrol prices are no good for incumbent governments.

Pity he can't get the Iraqis to stop killing each other as well as their friendly liberators/invaders.

Henry, 19/10.  Oil – down $1.28 to $57.65 per barrel; Gold – down 90 cents to $592.60; Dow Jones – up 42.66, or 0.36%, to close at 11,992.68; Australian dollar – being traded at 7am this morning at 75.49 US cents, up from yesterday’s close of 75.45 US cents; and US 10-year bond yields – 4.76% (down 1 basis point).

Henry says: After shuffling nervously for the past few days, the Dow eventually crept through the 12,000 mark in intraday trading, although many investors opted to cash in before close and the Dow settled at 11,992.68 - yet another record close.

Oil fell sharply yet again as suspicions arise that the forthcoming OPEC meeting will not lead to a supply cut.  After yesterday's higher-than-expected wholesale inflation reading, today's consumer inflation was along the lines expected by analysts - headline CPI fell by 0.5% (mainly due to huge falls in the price of petrol), while core inflation edged up 0.2%.  We will learn next Thursday whether 0.2% is too hot for the US Fed. For more on US inflation, click here.

Henry, 18/10.  Oil – down $1.01 to $58.93 per barrel; Gold – down $5.00 cents to $593.50; Dow Jones – down 30.58, or 0.26%, to close at 11,950.02; Australian dollar – being traded at 7am this morning at 75.35 US cents, unchanged from yesterday’s close of 75.36 US cents; and US 10-year bond yields – 4.77% (down 1 basis point).

Henry says: Wall St showed increased pessimism overnight with the release of a higher-than-expected jump in core wholesale inflation, highlighting that the Fed may not be finished hiking rates just yet.  Although headline wholesale inflation actually fell by 1.3%, the core rate was 0.6% - three times the rate expected.

Another factor of concern was poor earnings reports from the tech companies - Intel reported that profit was down a massive 35%.

Henry, 17/10.  Oil – up $1.37 to $59.94 per barrel; Gold – up $5.80 cents to $598.50; Dow Jones – up 20.09, or 0.17%, to close at 11,980.60; Australian dollar – being traded at 7am this morning at 75.37 US cents, up from yesterday’s close of 75 US cents; and US 10-year bond yields – 4.78% (down 2 basis points).

Henry says:  The Dow Jones again ended with a record, inching oh so closer to the momentous 12,000 mark.  Optimism among investors grew on the notion that corporate profits will remain strong despite the slowing economy.  The blue chip index touched 11,997 during the day, but it dipped slightly before close.  The question of how long this rally will last depends largely on the many earnings reports due this week, including 12 from blue chip companies who make up the Dow.

Henry, 16/10.  Australian dollar – was being traded at 7am at $US75.10, down slightly from Friday's close of $US75.13.

Henry says:  The big question this week is whether the recent Wall St rally will continue, and if that will lead to the Dow Jones bursting (or creeping) through the 12,000 mark for the first time in its 110-year history.  The Dow is up nearly 12% for the year, but please remember it is not yet much ahead of the previous peak 5 years ago (and the Nasdaq is less than half of its previous high water mark).

Strong earnings reports boosted the Dow late last week, with warehouse club Costco reporting another quarter of strong growth.

September US CPI and PPI data are being released this week, which will give analysts clear indication if inflation is abating as the economy slows.

Henry, 14/10.  Dow - up 13 points to 11060.51; ten year bond yields - up 2.8 basis points to 4.8 %; light sweet crude oil  - gained 71 cents to settle at US$58.57 a barrel;  December gold - settled $12.40 higher at $592.70 a troy ounce on the New York Mercantile Exchange; Aussie dollar - US$75.12, up slightly overnight.

Henry says: OPEC is inching toward a plan to cut production by 1 million barrels a day, US equity prices are inching up and economists are inching to a conclusion that all's well with the world.  "Those whom the gods would destroy, they first make mad".

Henry, 13/10.  Oil – up 27 cents to $57.86 per barrel; Gold – up $3.80 cents to $580.30; Dow Jones – up 95.57, or 0.81%, to close at 11,947.70; Australian dollar – being traded at 7am this morning at 75.10 US cents, up from yesterday’s close of 74.80; and US 10-year bond yields – 4.77% (down 1 basis point).

Henry says:  The Australian dollar opened firmer this morning on expectations the RBA will hike again at the November meeting.  Yesterday's strong employment statistics have strengthened the case for another 25 basis point hike to 6.25%.

Wall St set another record overnight as the Dow broke its record high for the fifth time in two weeks. Investors were focusing on positive earning news from such brands as McDonalds, as well as more positive economic data.  Continuing low oil prices are also giving Wall St a boost.

Henry, 12/10.  Oil – down 93 cents to $57.59 per barrel; Gold – up 30 cents to $576.50; Dow Jones – down 15.04, or 0.13%, to close at 11,852.13; Australian dollar – being traded at 7am this morning at 74.24 US cents, down from yesterday’s close of 74.32; and US 10-year bond yields – 4.78% (up 2 basis points).

Henry says: Stocks were down overnight on the release of hawkish US Fed minutes that indicated that monetary policy is still being tightened. Many traders were believing, as recently as last week, that the next interest rate move would be down - the minutes contradicted this belief. 

An example of the hawkishness of the minutes: "Many meeting participants emphasized that they continued to be quite concerned about the outlook for inflation. Recent rates of core inflation, if they persisted, were seen as higher than consistent with price stability, and participants underscored the importance of ensuring a moderation in inflation."

The poorer than expected Alcoa earnings report also dragged down stocks. Bonds dropped further, with the yield now up 22 basis points in the past week.  Oil is now at its lowest level in 2006 on rumours that a OPEC production cut is unlikely, as had previously been suggested.

Henry, 11/10.  Oil – down $1.44 to $58.52 per barrel; Gold – down $6.60 to $576.20; Dow Jones – up 9.36 to close at 11,867.17; Australian dollar – being traded at 7am this morning at 74.40 US cents, down from yesterday’s close of 74.53; and US 10-year bond yields – 4.76% (up 6 basis points).

Henry says: The Dow reached its fourth record close in two weeks as it inched less than a point above its last record high.

Earnings season began overnight when the Alcoa reported an 86% increase in third-quarter profit. However, analysts' were expecting more (!) and the stock fell in after-hours trading. The release of Alcoa's earnings generally signals the beginning of earnings season.

Henry, 10/10.  Oil – up 70 cents to $59.96 per barrel; Gold – up $6 to $582.80; Dow Jones – up 7.60 to close at 11,857.81; Australian dollar – being traded at 7am this morning at 74.44 US cents, up from yesterday’s close of 74.33; and US 10-year bond yields – 4.70% (bond market closed for Columbus Day).

Henry says: It was a light day of trading on Wall St due to the Columbus Day holiday.  However, the market seemed to largely ignore the controversy surrounding the nuclear test in North Korea and the Dow rose slightly.

In online corporate news, Google ignored copyright infringement concerns and bought Youtube overnight for a cool US$1.65 billion - a steal.

Henry, 9/10.  Oil – down 27 cents to $59.26 per barrel; Gold – up $1.30 to $576.80; Dow Jones – down 16.48 to close Friday at 11,850.21; Australian dollar – being traded at 7am this morning at 74.22 US cents, down from Friday’s close of 74.52; and US 10-year bond yields – 4.70% (up 9 basis points).

Henry says: US unemployment fell to 4.6% from 4.7%, raising concern as to whether the economy is slowing fast enough to ward off more interest rate hikes.  Bonds slumped as a result, with the yield on the benchmark 10-year treasury note rising 9 points to 4.70%.

In the current quarter many of the questions now being asked about the economy will be answered: how much the U.S. economy is slowing, how much trouble the housing market faces, whether inflation is truly falling and how well corporate earnings are holding up.  But no doubt others will be posed - this is why economics is known as "the dismal science".

Henry, 6/10.  Oil – up 62 cents to $60.03 per barrel; Gold – up $8.80 to $575.50; Dow Jones – up 16.08, or 0.14%, to close Thursday at 11,866.69; Australian dollar – being traded at 7am this morning at 74.63 US cents, unchanged from Thursday’s close; and US 10-year bond yields – 4.61% (up 6 basis points).

Henry says:  The Dow Jones hit it's third straight record close, and third straight record intra-day trading level, despite increases in the prices of oil and gold and a r6 basis point rise in US bond yields.

Charles Plosser, the new president of the Federal Reserve Bank of Philadelphia, shocked investors when he indicated that further rate hikes may be in the best interests of the economy.  In previous days, the markets had been almost convinced that the next rate movement would be down - but alas the call may have been a little early.  It will be interesting to note how hawkish or doveish the next Bernanke speech will be.

Henry, 5/10.  Oil – up 73 cents to $59.41 per barrel; Gold – down $14.80 to $566.70; Dow Jones – up 123.27 to close Wednesday at 11,850.61; Australian dollar – being traded at 7am this morning at 74.61 US cents, up from Wednesday’s close of 74.49 US cents; and US 10-year bond yields – 4.56% (down 6 basis points).

Henry says:  The Dow soared to another record high close overnight, as investors gained confidence from suggestions the next move in US interest rates will be down.  Bonds also rallied.

Wall Street was boosted by news of a rise in crude oil inventories, and investors were also heartened by news that Saudi Arabia said it wanted to keep prices lower. Gold plummeted on the news, although oil rebounded and ended slightly up.

Henry, 4/10.  Oil – down $2.35 to $58.68 per barrel; Gold – down $21.80 to $581.50; Dow Jones – up 56.99, or 0.49 percent, to close Tuesday at 11,727.34; Australian dollar – being traded at 7am this morning at 74.34 US cents, down from Tuesday's close of 74.78 US cents; and US 10-year bond yields – 4.62% (up 1 basis point).

Henry says: Celebrations all around as the Dow powered to a record high close (and record intra-day level) after threatening to do so for the past week or so. Difficult to imagine that less than four years ago it sat 38% lower 7286.27.  Quite a stunning recovery.

Oil and gold both plummetted overnight, helping to allay concern of inflation and convincing investors that the US economy is in for a soft landing.

Henry, 3/10.  Oil – down $1.88 to $61.03 per barrel; Gold – down 90 cents to $603.30; Dow Jones – down 8.72 at 11,670.35; Australian dollar – being traded at 7am this morning at 74.90 US cents, up from Monday’s close of 74.50 US cents; and US 10-year bond yields – 4.61% (down 2 basis points).

Henry says: It was a light day of trading as some Wall St traders observed the Yom Kippur holiday.  The Dow rose close to its record closing level before it retreated. 

Despite Nigeria and Venezuela announcing that they would cut oil production by 170,000 barrels a day, the price of oil fell substantially yet again, largely due to the lack of negative news over the weekend. However, if other OPEC member nations join in on the cuts, the impact could be more substantial. Iran has stated that they support moves to bolster prices.

Henry, 2/10. Oil – up 15 cents to $62.91 per barrel; Gold – down $6.70 to $604.20; Dow Jones – down 30.17 at 11,688.28; Australian dollar – being traded at 7am this morning at 74.62 US cents, down from Friday’s close of 74.83 US cents; and US 10-year bond yields – 4.63% (up 2 basis points).

Henry says: Stocks ended down on Friday in the US, ending a four session winning streak. US stocks produced the biggest third quarter gain in nine years as falling oil prices (and the pause in Fed tightening) convinced many investors that the US economy will experience a soft landing despite the poor housing sector. 

Click here to access Henry's Australian Economy (Q4) page, and click here for World Economy (Q4).