Markets Overview

  • ASX SPI 200 futures up 0.5% to 7,241.00
  • Dow Average up 0.1% to 34,395.14
  • Aussie up 1.5% to 0.6890 per US$
  • U.S. 10-year yield fell 9.4bps to 3.7634%
  • Australia 3-year bond yield fell 10 bps to 3.96%
  • Australia 10-year bond yield fell 7.8 bps to 4.05%
  • Gold spot up 0.2% to $1,960.63
  • Brent futures up 1.9% to $81.65/bbl

Economic Events

A gauge of Asian shares looked set to notch its biggest weekly advance since January amid a rebound in Chinese stocks and bets that the Federal Reserve is approaching an interest-rate peak.

Futures for Hong Kong, Japan and Australia all pointed to gains on Friday that would extend the MSCI Asia Pacific Index’s rally of 3.9% this week. A measure of US-listed Chinese companies rose 2.6%, adding to the upbeat outlook as investors warm to signs of renewed efforts to bolster the economy.

Falling Treasury yields and positive sentiment for risk taking continued to weigh on the dollar, which steadied early Friday after sliding for a fifth-straight session. That’s put an index of the currency’s strength on pace for the worst week since November.

The yen traded around 138 to the greenback after strengthening for six consecutive days. There appears to be a sudden unwinding of speculative yen short positions, and a waning of yen carry trade momentum, Japan’s chief currency official, Masato Kanda, said late on Thursday.

Wall Street and markets globally got an extra dose of encouragement to bid up riskier assets after another US inflation report highlighted the view that price pressures are easing in the world’s largest economy.

Tech megacaps led gains on Thursday, with the S&P 500 topping 4,500 and the Nasdaq 100 up over 1.5%. Yields on policy-sensitive two-year Treasuries dropped 12 basis points to 4.63%.

Disinflation has become a buzzword across trading desks, even though core inflation is still running above the central bank’s 2% target. Equities gained further traction on news that Fed Bank of St. Louis President James Bullard — who called for aggressive hikes — has resigned.

Other News

Australia’s government will not reappoint Philip Lowe as Reserve Bank governor, as widely anticipated, seeking a circuit-breaker as criticism of the central bank’s performance mounts.

Lowe, whose seven-year term expires on September 17, isn’t going to receive an extension, according to a person familiar with the matter. Lowe declined to comment when contacted by Bloomberg early Friday.

Treasurer Jim Chalmers is expected to announce his replacement on Friday following a meeting of the Cabinet, according to Australian Broadcasting Corp., which first reported the news.

The three main contenders are understood to be Deputy Governor Michele Bullock, Treasury Secretary Steven Kennedy and Finance Department Secretary Jenny Wilkinson, according to the ABC.

The decision has looked an increasing formality as Chalmers held off on an announcement until July, seeking to limit the time where there would be both an incumbent governor and a successor in the wings.

It comes after an independent review of the RBA recommended major changes at the institution, including setting up a separate policy committee, fewer rate meetings and press conferences after each decision. That followed criticism of Lowe’s forward guidance during Covid and confusion over communications.

Lowe, 61, was accused of letting inflation undershoot the RBA’s 2-3% target before Covid, then of leaving interest rates too low for too long during the pandemic, having guided that they were unlikely to rise before 2024.

Instead, inflation surged and the RBA began hiking in May 2022, increasing rates by 4 percentage points in a little over a year. Compounding that have been poor communications that left investors and traders confused over the bank’s reaction function and policy intentions.

The backlash intensified earlier this year following a media report that Lowe attended a closed-door briefing with rate traders on Feb. 9 — despite not having made a public appearance to explain a hawkish shift at a policy meeting two days earlier.

Lawmakers from the Greens Party had publicly called for Lowe to be dismissed and some parliamentarians from the ruling Labor Party had questioned whether his term should be extended.