Markets Overview

  • ASX SPI 200 futures up 0.2% to 7,276.00
  • Dow Average up 0.3% to 33,535.91
  • Aussie down 0.6% to 0.6622 per US$
  • U.S. 10-year yield rose 7.9bps to 3.6438%
  • Australia 3-year bond yield rose 7.8 bps to 3.21%
  • Australia 10-year bond yield rose 5.8 bps to 3.49%
  • Gold spot down 1.2% to $1,957.63
  • Brent futures down 1.3% to $75.98/bbl

Economic Events

Stocks climbed on signals that American lawmakers are making progress on debt-ceiling talks and will be able to avert a first-ever default. Treasury yields rose on speculation the Federal Reserve will need to keep interest rates higher for longer as inflation remains elevated.

The S&P 500 hit a nine-month high — closing within a whisker of 4,200. Tech outperformed, with the Nasdaq 100 rallying almost 2% to the highest since April 2022. The Dow Jones Industrial Average trailed major benchmarks, with a gain of 0.3%. Wall Street’s fear gauge, the Cboe Volatility Index, tumbled.

The Treasury’s cash balance dropped to $68.3 billion as of May 17, according to data published Thursday. That’s down from from $94.6 billion a day earlier and $140 billion at the end of last week. The Treasury’s bank account has been under downward pressure recently because of measures being taken to avoid breaching the $31.4 trillion debt cap.

Treasuries sold off across the curve. The two-year bond yield, which is more sensitive to imminent Fed moves, approached 4.3%. The dollar closed at the highest since March, climbing against all of its developed-market peers.

Other News

Chinese buyers are once again snapping up property in Australia, further fueling resurgent prices in everything from luxury homes to tiny student apartments.

Buyer inquiries from China for Australian properties soared 127% in the first three months of the year from the final quarter of 2022, according to data from real estate firm Juwai IQI. Real estate agents who work with Chinese buyers predict numbers will surge this year.

“We expect Chinese investment in Australian real estate to climb at least 30% in 2023 from 2022,” said Daniel Ho, co-founder of Juwai IQI, which helps sell foreign property to clients in Asia. “Chinese buyers are back, and more will come in the second half of the year than in the first.”

That outlook is likely to concern Australian policy makers who are already shocked at the speed of a housing recovery following 11 interest-rate increases in a year. Rising rents, limited supply and population growth are driving property markets from Sydney to Perth and a return of big-spending foreign buyers will add to pressure on prices.

Australia is the No.1 destination for Chinese buyers of offshore property — regaining its status following a hiatus when borders were shut for the pandemic and as relations between Beijing and Canberra steadily improve, according to Juwai IQI.

Foreign Investment Review Board data show China was the single largest source of offshore investment in Australian residential real estate in the fourth quarter of last year at A$600 million ($400 million).

Demand is strongest for three- and four-bedroom houses, said Peter Li, co-founder of Sydney-based Plus Agency which sells new projects, mainly to Chinese investors.

“We have a lot of Chinese people who are finally coming back to Australia and reuniting with their families,” Li said, referring to people separated during the pandemic. “They are looking to upgrade.”

He said Chinese first home buyers are “still not fully back into the market.”

Australia has long appealed to Chinese buyers as it’s in the same timezone and region as the mainland and has a reputation as a safe and environmentally clean destination.

Mounting tensions between Beijing and Canberra that included China introducing sanctions on some Australian commodities damped the ardor of mainland home buyers for a period. But that now seems to be in the rearview mirror, Juwai’s Ho said

Chinese demand is likely to strengthen further as more tourists and students travel to Australia in coming months, according to Diana Mousina, deputy chief economist at AMP Capital Markets.