The week in finance: Markets becalmed but will higher Chinese interest rates change things?

Having been driven along by a storm of political change since late last year, markets are now somewhat becalmed.

Measures of volatility in major equity markets are at their lowest level since 2014 and Wall Street ended the week slipping a tad, despite eking out a small rise over the week.

The local market has followed this listless lead with ASX futures pointing to a 0.2 per cent dip on opening.

But is it a case of quiet, too quiet?

The week played out as expected.

Dutch voters resisted the wave of euro-scepticism and the Fed raised rates in the US, both seen as positives for market sentiment.

The Peoples' Bank of China also jacked up money market rates by 0.1 per cent — just to keep a lid on things and maintain the new "growth isn't everything" mantra.

Central banks in the UK and Japan left things loose, looking for a bit of the exuberance the Chinese are trying to rein in.

Central bank commentary is the focus as data dries up

With a dearth of dial-altering data around the world this week, things are likely to remain fairly range-bound and dull again.

Locally, the RBA publishes the minutes from its last "no-change" meeting on Tuesday — so nothing new there — although Assistant Governor Luci Ellis (Monday) and Deputy Governor Guy Debelle (Wednesday) will be out and about maybe, adding some colour to monetary policy in set piece speeches. "Colour" may be too strong a word for it, though.

Why do US rates matter?

It's no surprise the Fed raised US rates, but Phillip Lasker warns the flow-on effect may catch out Australian borrowers.

The Bureau of Statistics releases its quarterly house price index (Tuesday) but it is backward looking, not adjusted for quality differences and unlikely to tell the market anything it does not already know.

For the record, the consensus view is houses prices will be up around 6 per cent over the year, compared with 3.5 per cent annual growth recorded in the third quarter.

The global scene is equally quiet.

The Fed has nine speakers on the circuit, with chair Janet Yellen probably grabbing the most interest on Thursday.

The main piece of data will be February's durable orders (Friday). It is again likely to reinforce the idea that while the US economy is picking up, business investment remains weak.

Things are quiet on the eastern front too, although PBoC Govenor Zhou Xiaochuan is scheduled to speak at the Boao Forum next Saturday and may give some insights into the recent moves to tighten monetary policy and cool speculation.

Hints that China's tightening has just started would be just the shot to get things moving again, although it would most likely be a scramble to the exits, particularly in commodity plays.

Commodities slide slows

The most significant moves of last week were the US dollar in retreat, despite the rate hike, and a renewed interest in commodities.

The greenback's dip against a basket of currencies can largely be attributed to the Fed still being highly conditional about raising rates, as well as a lowering of expectations if the trajectory of "lift-off".

The fall in the dollar helped the resources sector last week, but many other forces afoot are making forecasting difficult.

The idea a global recovery in industrial activity is gaining momentum and inflation is creeping back is helping confidence and prices.

However, as Macquarie's commodities team recently noted, cracks are starting to appear in that thesis, particularly given China's moves to raise rates this month.

"While demand is clearly significantly better than this time last year, current indicators aren't showing the aggression we might have expected from the strong sentiment seen over 2017 to date," Macquarie noted.

"Indeed, there seems an increasing chance that demand is undershooting what were admittedly high expectations."

Not only is demand an issue, but Macquarie said there is evidence the positive sentiment has driven a noticeable surge in supply, which in turn could see prices tank.

While Macquarie has raised its 2017 forecasts for most metals and bulk materials, it does not expect the good times to last.

"After the run we have had, from current levels we are generally neutral to bearish on most prices into mid-year, as Chinese tightening starts to show wider impact," Macquarie told its clients.

For iron ore, Macquarie said it means a normalised price for iron ore of $US50 a tonne in the second half of the year, around 45 per cent below where it was trading on Friday.

Oil slide may not be that steep

Oil also arrested its recent price capitulation, with the key global Brent benchmark price edging up 0.5 per cent over the week to $US51.76 a barrel on Friday night.

OPEC's assurance its production cuts could remain in place for longer than its original six-month trial, if the current glut remained in place, certainly helped in the short term.

However, the fixation with the meticulous bookkeeping of US energy agencies — showing more oil rigs being added and inventories building up — is also waning, according to RBC commodity strategist Michael Tran.

"While the bearish overhang of bulging US stocks continues to cling to the market like a wet blanket, we caution against using US inventories as a proxy for or indicator of the global rebalancing act given that stocks are drawing in less visible regions within the OECD," Mr Tran said a research note.

"The US data is the most frequent and transparent data source, whereas data in much of the rest of the world is lagged, opaque, or non-existent."

Focussing entirely on the US market would lead to pretty grim view of things for oil producers, but Mr Tran argued the US was likely to be the last of the major economic regions to regain a balance in supply and demand.

"Using the US as a bellwether for broader OECD or global stocks is hazardously flawed given the headline hoopla surrounding near record high US inventories, particularly given that OECD oil stocks started drawing marginally in fourth quarter (of 2016)," Mr Tran said.

"In short, storage gluts are shrinking in key regions outside the US, but simple heuristics (quick analysis) can lead one to lose the forest for the trees."

That said, RBC expects pent-up US supply and hedging will keep oil prices bouncing around $US50 a barrel for some time, before grinding upwards toward $US60 a barrel by the end of the year.