Markets Overview

  • ASX SPI 200 futures down 1.1% to 7,021.00
  • Dow Average down 1.0% to 33,671.71
  • Aussie down 0.5% to 0.6336 per US$
  • U.S. 10-year yield rose 6.7bps to 4.9021%
  • Australia 3-year bond yield rose 8.3 bps to 4.17%
  • Australia 10-year bond yield rose 10 bps to 4.65%
  • Gold spot up 1.4% to $1,950.85
  • Brent futures up 1.5% to $91.27/bbl

Economic Events

  • 10:30: (AU) Australia to Sell A$1 Billion 140-Day Bills
  • 10:30: (AU) Australia to Sell A$500 Million 91-Day Bills
  • 11:30: (AU) Sept. Full Time Employment Change, prior 2,800
  • 11:30: (AU) Sept. Part Time Employment Change, prior 62,100
  • 11:30: (AU) 3Q NAB Business Confidence, prior -3
  • 11:30: (AU) Sept. Employment Change, est. 20,000, prior 64,900
  • 11:30: (AU) Sept. Participation Rate, est. 67.0%, prior 67.0%
  • 11:30: (AU) Sept. Unemployment Rate, est. 3.7%, prior 3.7%
  • 15:30: (AU) RBA Annual Report

A giant exchange-traded fund tracking the Nasdaq 100 (QQQ) advanced in late trading as Tesla Inc. rebounded, while Netflix Inc. rallied after earnings. The gains signaled a recovery in megacaps, following a slide driven by geopolitical risks and higher Treasury yields.

The S&P 500 dropped 1.3% on Wednesday and oil rallied as Iran intensified its rhetoric against Israel after an explosion at a Gaza hospital that complicated diplomatic efforts to rein in the Middle East conflict. Morgan Stanley sank the most since 2020 as profit fell on an investment-bank slowdown. United Airlines Holdings Inc. tumbled almost 10% after warning the Israel-Hamas war and higher jet fuel costs would weigh on earnings.

“The risks of an escalation have risen on the back of the latest news reports regarding the hospital bombing,” said Jane Foley, head of foreign-exchange strategy at Rabobank. While there have been few signs of panic, “on any clear escalation, we can expect to see a ratcheting up of risk aversion,” she said.

Traders also sifted through Fedspeak and the latest Beige Book for clues on the central bank’s next steps. The outlook for the US economy is stable or may show softer expansion, the Federal Reserve said in its survey of regional business contacts.

Fed Bank of New York President John Williams said rates will have to stay at restrictive levels “for some time” to bring inflation back to the central bank’s target. Meantime, Governor Christopher Waller noted policymakers can wait and gather more data before deciding if the economy needs further monetary restraint.

Other News

China signaled possible progress on resolving a dispute with Australia on punitive wine tariffs as relations between the trading partners continues to thaw. Penfolds-maker Treasury Wine Estates Ltd. surged.

Beijing and Canberra have agreed to engage with each other over the tariffs, Chinese Ambassador Xiao Qian told reporters after an event on Wednesday. The levies, some as high as 200%, were imposed in 2020 and Australia has taken China to the World Trade Organization over the measures.

“We’re in that process, and we expect there will be more positive outcomes in the coming likely weeks or months,” Xiao said after the event in Canberra.

There’s been an improvement in relations with China since the election of the center-left Labor government in May 2022. Australian coal and timber have been allowed back into the Chinese market, while Beijing announced in August it would be ending tariffs imposed on barley exports.

Treasury Wine Estates rallied the most since February 2022 following the news, closing 5% higher at A$12.23 a share. In August, Treasury said cheaper bottles of its Penfolds brand priced in the A$30 to A$40 range could reach China’s shores as soon as six weeks after the end of tariffs.

Australian Trade Minister Don Farrell also announced on Wednesday that he would be heading to China for further meetings in early November. Prime Minister Anthony Albanese is expected to visit Beijing before the end of the year, however no specific date has been set yet.