Markets Overview

  • ASX SPI 200 futures down 0.5% to 7,195.00
  • Dow Average down 0.6% to 34,443.19
  • Aussie little changed at 0.6383 per US$
  • U.S. 10-year yield rose 2.4bps to 4.2836%
  • Australia 3-year bond yield fell 1 bp to 3.80%
  • Australia 10-year bond yield fell 0.6 bps to 4.13%
  • Gold spot down 0.5% to $1,916.48
  • Brent futures up 0.7% to $90.64/bbl

Economic Events

  • 10:30: (AU) Australia to Sell A$1 Billion 49-Day Bills
  • 10:30: (AU) Australia to Sell A$1 Billion 133-Day Bills
  • 11:30: (AU) July Exports MoM, prior -2%
  • 11:30: (AU) July Imports MoM, prior -4%
  • 11:30: (AU) July International Trade Balance, est. A$10b, prior A$11.3b
  • 13:10: (AU) RBA’s Lowe-Speech
  • 16:30: (AU) Aug. Foreign Reserves, prior A$91b

Stocks declined, while Treasury yields climbed after a stronger-than-estimated reading on the US services industry bolstered speculation the Federal Reserve will keep interest rates higher for longer.

The S&P 500 closed below 4,500 and the Nasdaq 100 fell almost 1% — with Apple Inc. leading a slide in big tech amid higher bond rates. The company also dropped on a news report that Chinese agencies are barring the use of iPhones at work. Two-year yields topped 5%. Swap contracts showed bets on a Fed hike in November rising to about 60%. The dollar edged higher, following a rally that prompted Japan and China to defend their currencies.

Other News

Australia’s economy has recorded a slower annual growth rate of 2.1 per cent, according to the Australian Bureau of Statistics (ABS).

Economic activity grew by just 0.4 per cent in the June quarter, matching the subdued 0.4 per cent March quarter outcome.

It means the annual pace of growth for the economy has slipped from 2.7 per cent at the end of 2022, to just 2.1 per cent at the end of June, confirming a marked slowdown in the first six months of this year.

However, when you account for the rapid pace of population growth that’s occurring in Australia this year, figures show the amount of economic output per person has now declined for six months in a row.

Measured as GDP per capita, the figures show a decline of 0.3 per cent in the June quarter, following a similar decline of 0.3 per cent in the March quarter.

“The economy has now contracted for two consecutive quarters on a per capita basis — creating a so-called per capita recession — but a technical recession remains unlikely,” said former Reserve Bank economist Callam Pickering.

“Australia’s population is growing rapidly, supporting overall economic activity.”

Households have been using whatever finances they have to cope with rising interest rates and inflation.

The ABS data show the household saving ratio has fallen for the seventh consecutive quarter to 3.2 per cent, down from 3.6 per cent in the March quarter.
It’s the lowest level since June 2008, during the global financial crisis.

ABS officials say the fall in the rate of household saving has been driven by higher interest payments on dwellings (due to the Reserve Bank’s interest rate increases), higher income taxes, and greater spending by households to meet cost of living pressures.

“Today’s National Accounts data confirms what the RBA said in yesterday’s cash rate decision and what most households and businesses around Australia have already been feeling,” said Brendan Rynne, KPMG chief economist.

“Economic activity is flat and growth has largely stalled,” he said.

Australians are still noticeably pulling back on discretionary spending, but they’re having to spend more on essential goods and services due to rising rents, insurance premiums, and higher electricity and gas bills.

In the June quarter, discretionary spending fell by 0.5 per cent, the third consecutive quarterly fall.

The decline was led by recreation and culture (-2.5 per cent), and furnishings and household equipment (-2.5 per cent).

Partly offsetting that weakness was the purchase of vehicles (+5.8 per cent), with vehicles being delivered to households this quarter after quarantine delays at ports.

(Australia Broadcasting Corp.)