Markets Overview

  • ASX SPI 200 futures up 1.2% to 7,281.00
  • Dow Average up 1.0% to 34,907.11
  • Aussie up 0.3% to 0.6441 per US$
  • U.S. 10-year yield rose 3.7bps to 4.2843%
  • Australia 3-year bond yield fell 2.3 bps to 3.83%
  • Australia 10-year bond yield fell 3.3 bps to 4.11%
  • Gold spot up 0.1% to $1,910.69
  • Brent futures up 2.5% to $94.18/bbl

Economic Events

Stocks in Asia are set to follow US benchmarks higher after strong economic reports revived speculation the Federal Reserve will be able to engineer a soft landing even if it keeps interest rates higher for longer. The dollar strengthened, the euro slid and oil extended its rally.

Equity futures contracts for Hong Kong, Japan and Australia advanced. The S&P 500 and Nasdaq 100 both rose 0.8% on Thursday, though equity futures pared gains earlier in the session as retail sales and producer prices beat estimates amid rising energy costs. The euro fell to the lowest level in more than five months against the dollar after the European Central Bank hiked rates for a 10th consecutive session. Crude in New York settled above $90 a barrel for the first time since November.

“Stocks are higher after another round of impressive US economic data suggests the consumer is still doing just fine,” said Edward Moya, senior market analyst for the Americas at Oanda. “Wall Street seems content with the risk of one more Fed rate hike as consumer resilience is expected to gradually weaken. While the US growth story is still alive, the outlook for Europe remains uninspiring as stagflation risks grow.”

The latest data reinforces the view that the US economy is headed for a period of moderate growth, avoiding a recession over the coming 12 months, according to Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management.

“That should support equities,” she noted. “However, uncertainty is likely to keep broad equity markets choppy.”

There are still suggestions of an overheating economy that will encourage Fed hawks who believe strong growth today will lead to higher inflationary pressures,” according to Will Compernolle, macro strategist at FHN Financial.

“The odds are still heavily in favor of the Fed leaving rates unchanged next week, but the dot plot showing another increase later this year,” he said.

Bond traders have spent most of the last two months worrying about persistent inflation and an economy that seems to be running hot, according to Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. The most-recent economic data just reinforced that, he said.

Oil’s rally above $90 a barrel is the latest milestone in a surge driven by output cuts from Saudi Arabia and Russia amid record global consumption and follows reports this week warning of tightness in the coming months. Futures opened strongly on Friday, but with prices soaring more than 30% since late June, traders are bracing for a potential pullback.

Other News

Australia’s top general has raised serious concerns over how artificial intelligence can be used by hostile nations to further speed up disinformation and disrupt liberal democracies, eroding the ability to deter military conflict.

“This tech future may accelerate truth decay,” General Angus Campbell, chief of Australia’s Defence Forces, said in a rare speech in Canberra on Thursday night at an event hosted by the Australia Strategic Policy Institute think tank. “As these technologies quickly mature, there may soon come a time when it is impossible for the average person to distinguish fact from fiction,” he said.

He warned that strategic competitors, including China, could “bypass the need for a physical attack and strike directly at the psychological,” calling for greater education to counter the impact of disinformation.

While the growth of new AI technologies could benefit societies, they also present huge opportunity for opponents to cause irreparable damage, according to Campbell, becoming the latest Western figure to sound the alarm over AI’s capacity to worsen disinformation.

Politicians in countries including Australia, the UK and the US have called for greater government oversight of AI development. Australia’s center-left Labor government is evaluating whether regulation is necessary, with new laws possible before the end of the year.

“Building within us, across our community, that sense of a capacity for critical thinking is the first step in having that engaged and informed public conversation,” Campbell said.