Markets Overview

  • ASX SPI 200 futures up 0.4% to 7,138.00
  • Dow Average up 0.6% to 34,559.98
  • Aussie up 0.4% to 0.6430 per US$
  • U.S. 10-year yield fell 3.2bps to 4.2020%
  • Australia 3-year bond yield rose 1 bp to 3.86%
  • Australia 10-year bond yield fell 2.1 bps to 4.14%
  • Gold spot up 0.3% to $1,920.20
  • Brent futures down 0.1% to $84.38/bbl

Economic Events

  • 17:40: (AU) RBA’s Bullock-Speech

Asian stocks looked poised to follow US equities higher, with traders awaiting a raft of economic figures over the next few days for clues on the outlook for global central bank policy.

Equity futures for Hong Kong and Australia pointed to gains on Tuesday after the S&P 500 notched its first back-to-back advance in August. Most major currencies were little changed in early trading. The upcoming Japanese jobs report is expected to fit into the view of a central bank on hold.

Expect the yen to weaken to levels last seen more than 30 years ago if the Bank of Japan sticks to its dovish stance, according to Goldman Sachs Group Inc. Over the next six months the yen is projected to reach 155 per dollar — the weakest since June 1990, according to strategists led by Kamakshya Trivedi. They had previously expected the yen to trade to 135.

The Japanese currency hovered near 146.5 against the dollar. It has lost more than 10% this year.

August’s risk-off mood showed some signs of abating, but global equities are still poised for their worst month since September.

Employment growth in the US probably cooled and wage increases moderated in August, suggesting a further tempering of inflation risks that reduces the urgency for another Federal Reserve interest-rate hike. Euro-area inflation readings will also be in focus this week, while China’s PMI figures are expected to reinforce that the economy is going from bad to worse.

Other News

Bloomberg Economics expects Australia’s CPI report to show inflation easing to 5.2% year on year in July from 5.4% in June, as changes in childcare subsidies damp service-price gains. The data are due Wednesday.

  • Broadly, inflation is on a downward track. We see it returning to the midpoint of the Reserve Bank of Australia’s 2%-3% target band in 3Q24.
  • But over the coming months there’s a risk it will get sticky due to recent increases in gasoline prices.
  • The RBA is likely to keep a tightening bias at its Sept. 4 meeting in order to ensure inflation expectations remain contained, though a rate hike is unlikely.
  • The central bank will probably want to see further evidence inflation is headed back toward its target band before it explicitly confirms it’s finishing tightening.