Markets Overview

  • ASX SPI 200 futures up 0.3% to 7,163.00
  • Dow Average little changed at 33,573.28
  • Aussie up 0.8% to 0.6671 per US$
  • U.S. 10-year yield fell 1.6bps to 3.6659%
  • Australia 3-year bond yield rose 7.5 bps to 3.64%
  • Australia 10-year bond yield rose 2 bps to 3.80%
  • Gold spot little changed at $1,963.35
  • Brent futures down 1.0% to $75.95/bbl

Economic Events

  • 09:20: (AU) RBA’s Lowe-Speech
  • 09:50: (AU) RBA’s Bullock-Panel Discussion
  • 11:00: (AU) Australia to Sell A$700 Million 3.75% 2034 Bonds
  • 11:30: (AU) 1Q GDP YoY, est. 2.4%, prior 2.7%
  • 11:30: (AU) 1Q GDP SA QoQ, est. 0.3%, prior 0.5%
  • 16:30: (AU) May Foreign Reserves, prior A$92.4b

US stocks gained Tuesday as a rotation into financial shares bolstered hopes the breadth of the S&P 500’s recent rally might extend beyond technology soon.

The World Bank said in a report Tuesday the global economy is in a precarious situation as sharp interest-rate hikes hit activity and stir vulnerabilities in lower-income countries. Those fears have suppressed equities. But with the rate of US inflation still high, traders increasingly expect the Federal Reserve will hold rates steady at its June meeting, while keeping the option for hikes later on open. Former vice-chair Richard H. Clarida also said Tuesday it was unlikely the US central bank will start cutting rates until 2024.

A Treasury bill auction announcement weighed on short-dated Treasuries on Tuesday while the 10-year note was little changed.

In commodities, oil gave up gains off news of Saudi Arabia’s supply cut, sending energy stocks including Chevron Corp. lower. Wheat surged after Ukraine said Russian forces blew up a giant dam in the country’s south. And gold was little changed.

Other News

Australia’s central bank surprised investors for a second straight month with an interest-rate increase that suggested it’s worried about inflation expectations becoming unmoored if policy isn’t tightened further.

The Reserve Bank also signaled that further rate hikes “may be required” even as money markets are still refraining from fully pricing in another adjustment. While many economists predict one more increase to 4.35%, others see the RBA as done and instead expect that rates will need to remain higher for longer.

The RBA appears worried about whether it can meet its forecast for inflation to return to the top of its 2-3% target by mid-2025 without further tightening. Governor Philip Lowe went so far as to omit from Tuesday’s statement his long-held view that “medium-term inflation expectations remain well anchored.”

That chimes with similar concerns among Federal Reserve policy makers that rate hikes to date haven’t done enough to tamp down price pressures.