Markets Overview

  • ASX SPI 200 futures up 1.3% to 7,113.00
  • Dow Average up 1.6% to 34,884.20
  • Aussie up 2.1% to 0.6508 per US$
  • U.S. 10-year yield fell 19.8bps to 4.4414%
  • Australia 3-year bond yield fell 0.2 bps to 4.29%
  • Australia 10-year bond yield fell 0.5 bps to 4.66%
  • Gold spot up 0.8% to $1,963.46
  • Brent futures little changed at $82.46/bbl

Economic Events

  • 11:00: (AU) Australia to Sell A$800 Million 2.25% 2028 Bonds
  • 11:30: (AU) 3Q Wage Price Index QoQ, est. 1.3%, prior 0.8%
  • 11:30: (AU) 3Q Wage Price Index YoY, est. 3.9%, prior 3.6%

Stocks climbed while bond yields tumbled as an unexpected inflation slowdown bolstered bets the Federal Reserve’s aggressive hiking cycle is now over — and the next move will be a rate cut next year.

The S&P 500 rose nearly 2%, the most since April. Tesla Inc. led gains in megacaps and Nvidia Corp. rallied for a 10th straight session. Regional banks jumped almost 6%. The Russell 2000 index of small caps added over 5%. Goldman Sachs Group Inc.’s basket of the most-shorted stocks beat the broader market in a sign some traders are preparing to cover bearish wagers. Two-year yields plunged over 20 basis points. The dollar fell 1.2%.

While Wall Street’s rally could risk further easing of financial conditions — and ultimately complicate the Fed’s job — bets on a “pivot” next year have increased. Fed swaps indicate the odds of another hike have fallen to almost zero — with the market pricing in a 50 basis-point rate cut by July.

Other News

Barings LLC is planning an Australian private credit fund, seeking to provide an alternative to banks and the bond market, an executive at the investment company said.

The fund, to be launched by Barings Australia, hopes to raise A$1.4 billion ($893 million) from institutional and high net-worth investors in the next 12 to 18 months. The money will be lent to Australian corporate borrowers, Shane Forster, head of the firm’s Asia Pacific private finance group in Hong Kong, said in an interview.

Private credit has grown into a $1.6 trillion market worldwide as banks shy away from more risky lending. The market is still emerging in Asia Pacific. But some notable companies — including Whitehaven Coal Ltd., Australian casino operator Star Entertainment Group Ltd. and budget airline AirAsia — have recently tapped debt funds.

Forster said Barings’ new fund is offering investors net returns of five to six percentage points over the cash rate, which the Reserve Bank of Australia last week lifted to a 12-year high of 4.35%.

Barings currently has about A$2.6 billion of loan assets in the country, primarily in healthcare, education and software. “We can find arguably lower risk businesses here in Australia and New Zealand than the smaller deals we do in Europe and US,” he said.