Weekly commentary

Economy: The RBA at its 5th September Board meeting decided to leave official interest rates as expected unchanged, but we continue to forecast a further rate increase before Christmas. The A$ continues to come under significant downward pressure from a surging US$ against the Euro as funds continue to flow into the US equity market and other US based assets. The weakness in the A$ is occurring despite a strong rise in commodity prices which has seen the CRB commodity price index rise to a 2 year high. It is now expected that US official interest rates will remain on hold for the remainder of 2000 as economic growth is slowing. Equities: The strong rally in US bonds over the past couple of months, coupled with continuing sustainable US economic growth will provide the spring board for a further rally in US equities. The Australian market over the past week declined on the back of weak TLS and CBA shares after disappointing FY00 earnings results, while resource equities continue to benefit from firm commodity prices and weak A$.

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