Markets Overview

  • ASX SPI 200 futures up 0.3% to 7,022.00
  • Dow Average down 0.3% to 34,063.05
  • Aussie down 0.5% to 0.6401 per US$
  • U.S. 10-year yield fell 4.3bps to 4.5233%
  • Australia 3-year bond yield fell 8.8 bps to 4.16%
  • Australia 10-year bond yield fell 11 bps to 4.58%
  • Gold spot down 1.1% to $1,948.34
  • Brent futures down 2.3% to $79.74/bbl

Economic Events

  • 10:30: (AU) Australia to Sell A$1 Billion 133-Day Bills
  • 10:30: (AU) Australia to Sell A$1 Billion 105-Day Bills

Stocks saw their November rally fade, with traders awaiting Jerome Powell’s take on Wall Street’s dovish narrative. Treasuries rose in a busy week for government sales.

Amid signs of buyer exhaustion, the S&P 500 rose only 0.1%, while still notching its eighth straight up day. Wall Street’s “fear gauge” — the VIX — saw its longest slide since October 2015. Ten-year yields fell below 4.5% after a $40 billion auction — despite mixed metrics, which included a slightly higher-than-anticipated rate of 4.519%: a sign that demand fell short of expectations. Thirty-year rates hit the lowest in over a month. Brent oil settled under $80.

Treasury sales are exerting a growing sway over stocks. That’s the take from Citigroup Inc. data showing the S&P 500 has moved about 1% in either direction on auction days since the start of 2022, eclipsing the prior decade’s average. Their analysis leaves traders on high alert for Thursday’s $24 billion sale of 30-year bonds.

Wall Street also kept a close eye on Fedspeak. Speaking briefly on Wednesday, Powell didn’t comment on the outlook for rates. He’ll have more time to express his views Thursday during a panel on policy challenges.

Swap traders are pricing in almost no chance of an interest-rate increase in December, and predict the current level of the Fed’s benchmark rate — 5.25% to 5.5% — will mark the peak of the tightening cycle.

Other News

Embattled telecommunications firm Optus could face a flood of compensation claims from businesses and consumers hit by Wednesday’s national outage, as the government stepped up its scrutiny with the announcement of a public review into the meltdown.

Communications Minister Michelle Rowland said on Thursday morning that the government would conduct a post-incident telecommunications review, in addition to a separate investigation announced yesterday by the Australian Communications and Media Authority, as Optus’ handling of the outage came under fire.

Separately, Assistant Treasurer and Finance Minister Stephen Jones told ABC’s Radio National that compensation must be on the table for affected Optus customers, and slammed the company for leaving the government to do its crisis communications, instead of chief executive Kelly Bayer Rosmarin.

“I expect a significant impact on small business, everything from flower shops to Uber drivers have been impacted by it,” Mr Jones said.

“If you’re a small business that’s lost a day’s takings because your phone system wasn’t working, then you’re going to be asking those hard questions. So compensation absolutely has to be on the table.”

Ms Rowland said her department was developing the terms of reference for a post-incident review, which she said would be designed to help support major telecommunications providers to improve post-outage processes.

ACMA’s review is focused on Optus’ failure to keep providing access to 000, which is probably a breach of its obligations, and focus will also fall on whether it has fallen foul of executives’ and board responsibilities under new critical infrastructure rules.

“While we welcome that Optus services were restored over the course of the day, it is critical the government conducts a process to identify lessons to be learned from yesterday’s outage,” Ms Rowland said. “Connectivity is absolutely essential for Australian consumers and businesses, and the
impacts of this outage were particularly concerning.”

The government’s reviews will be significant in the light of Optus’ decision to keep the findings of the independent review into last year’s data breach debacle secret. It is unlikely to escape public scrutiny if the latest reviews find its outage was caused by incompetence or under-investment.

Mr Jones hit out at the company’s communications with customers on Wednesday, echoing concerns customers had after the data breach, saying it took too long for Optus executives to explain what was happening.

“From a customer point of view and the communications that were made by the company to the country and the customers of Optus, they were absolutely sub par,” Mr Jones said.

“Coming off the back of the previous data breach where they were facing similar calls from customers to explain exactly what was going on, this simply wasn’t good enough.”

He said Ms Rowland had gone on live TV on Wednesday morning to try to explain to Australians what was happening, trying to “fill the gaps” left by Optus’ silence.

“It’s not her job as the minister to explain what’s gone on inside a company, it’s the company’s job to do that,” Mr Jones said.

“Bizarre would be the kindest thing you could say about it. Just not good enough, frankly.”

Optus, meanwhile, issued another apology for the chaos its outage caused. Its vice president of regulatory and public affairs, Andrew Sheridan, welcomed the government review and suggested it was evaluating potential compensation offers.

“Optus looks forward to fully co-operating with the proposed reviews by both the Department of Communications and the ACMA into yesterday’s network outage,” he said.

“As a critical infrastructure provider, we understand how important it is to ensure continuity of service and any lessons learnt are likely to be helpful for both Optus and others in our industry.

“We value our customers’ loyalty, and are looking at ways to say ‘thank you’. Optus once again apologises to our customers and others that were impacted by the outage.”

(Financial Review)