High chance of Dec hike in US interest rates

AFTER Friday's US employment report, the odds that the US Federal Reserve will raise interest rates in December have climbed significantly. What this means is that markets will have to accelerate their adjustment to a world of higher US interest rates, a painful process that will see stocks undergo regular bouts of volatility as players try to figure out how long the hiking cycle will be.

In essence, investment thinking will shift from "bad economic news is good for stocks'' to "good economic news is good for stocks''.

The news that US nonfarm payrolls climbed 271,000 in October, much stronger than the 180,000 expected and lowering the jobless rate from 5.1 to 5 per cent, brought the bond market sellers out. The yield on the benchmark 10-year note jumped 10 basis points to 2.33 per cent, the highest since July.