Markets Overview
- ASX SPI 200 futures down 0.5% to 7,190.00
- Dow Average down 0.6% to 33,562.86
- Aussie little changed at 0.6616 per US$
- U.S. 10-year yield little changed at 3.6850%
- Australia 3-year bond yield rose 14 bps to 3.57%
- Australia 10-year bond yield rose 14 bps to 3.78%
- Gold spot up 0.7% to $1,961.51
- Brent futures up 0.2% to $76.32/bbl
Economic Events
- 11:30: (AU) 1Q Net Exports of GDP, est. -0.5, prior 1.1
- 11:30: (AU) 1Q BoP Current Account Balance, est. A$15b, prior A$14.1b
- 14:30: (AU) June RBA Cash Rate Target, est. 3.85%, prior 3.85%
US equities edged lower Monday after both technology and energy stocks erased earlier gains in subdued trading volume.
Tech shares led the S&P 500 lower with Apple Inc. erasing gains of as much as 2% in anticipation of a new mixed-reality headset. Oil majors Chevron Corp. and Exxon Mobil Corp. also slipped after rallying earlier on higher oil prices following a Saudi Arabia supply cut.
Meanwhile, Treasuries drifted after a report the US services sector nearly stagnated in May. The Institute for Supply Management’s overall gauge of services unexpectedly fell to the lowest level of the year, offering a less upbeat assessment of the US economy.
A rally in Big Tech and optimism of a pause in interest rate hikes has driven major gains in the S&P 500. However, risks still loom with traders increasingly speculating the Federal Reserve will hold rates steady in June, but keep its options open for hikes later on.
Other News
Australia’s wheat production is forecast to slump 34% in the coming season as the development of El Niño is likely to suppress rainfall across large swaths of the country, the government crop forecaster said.
Dry conditions and low soil moisture in some growing regions mean that much of the 2023–24 crop has been sown dry and will require adequate and timely rain to allow plants to germinate, the Australian Bureau of Agricultural and Resource Economics and Sciences said. Wheat is a major winter crop in Australia with planting from April and the harvest starting in November.
Apart from Australia, wild weather is affecting crops elsewhere, including in the Americas and North Africa. The harvest in top wheat consumer China has also been hit by torrential rains, potentially boosting the need for more imports. For now, global wheat prices are near their lowest in over two years on optimism for bumper harvests across Europe, helping to keep food costs in check.
The expected onset of El Niño conditions from July will likely see winter crop output fall significantly, Abares said. Dry weather has already arrived, according to the Bureau of Meteorology, with the second-driest May on record nationwide and the driest in Western Australia since observations began. Prior to this, the country had a run of three very wet years, unusual historically.
The country’s wheat output may decline 34% from a record to 26.2 million tons, slightly below the 10-year average. Barley production is set to fall 30% to 9.9 million tons, around 11% below the 10-year average. Canola output may drop 41% to 4.9 million tons, 15% above the 10-year average, according to Abares.
Abares predicted the value of Australia’s agricultural exports would fall 17% from a record to A$65 billion ($43 billion) in 2023-24, it said in a separate report. Export earnings are still forecast to be the third highest on record.
(Bloomberg)
