Markets Overview

  • ASX SPI 200 futures down 0.3% to 7,190.00
  • Dow Average little changed at 36,132.82
  • Aussie little changed at 0.6554 per US$
  • U.S. 10-year yield fell 4.8bps to 4.1173%
  • Australia 3-year bond yield fell 11 bps to 3.88%
  • Australia 10-year bond yield fell 13 bps to 4.28%
  • Gold spot up 0.5% to $2,029.71
  • Brent futures down 3.7% to $74.33/bbl

Economic Events

  • 10:30: (AU) Australia to Sell A$1 Billion 154-Day Bills
  • 10:30: (AU) Australia to Sell A$1 Billion 77-Day Bills
  • 11:30: (AU) Oct. Imports MoM, prior 7.5%
  • 11:30: (AU) Oct. Exports MoM, prior -1.4%
  • 11:30: (AU) Oct. International Trade Balance, est. A$7.5b, prior A$6.79b
  • 16:30: (AU) Nov. Foreign Reserves, prior A$92.1b

The rally in bonds around the globe gained further traction, with soft economic readings in both the US and Europe fueling speculation that major central banks will cut rates in the year to come.

Just two days ahead of the US jobs report, data showed the gradual cooling in the labor market that the Fed would like to see. Private payrolls increased 103,000 last month, trailing estimates and giving further credence to Wall Street’s dovish bid. Germany’s factory orders unexpectedly fell — highlighting how manufacturing in Europe’s largest economy remains stuck in a rut.

US 10-year yields extended their decline to 4.12%. Two-year bond rates edged slightly higher — a healthy sign, according to some traders, after a massive repricing of Fed bets by the front-end of the US curve. The S&P 500 lost steam amid a slide in energy producers and some megacaps like Nvidia Corp. and Microsoft Corp. Oil sank below $70 a barrel as concern about excess supplies overshadowed a report showing shrinking US inventories.

Other News

Australia’s government isn’t in a position to predict a budget surplus for fiscal 2024 in its half-yearly update, Treasurer Jim Chalmers said, while adding the deficit will be “much smaller” than previously anticipated.

Chalmers will release the mid-year economic and fiscal outlook next week that outlines Treasury’s estimates for the government’s books and the economy, including gross domestic product and inflation. In May, it forecast an underlying cash deficit of A$13.9 billion for 2023-24.

Speaking to Sky News after Wednesday’s release of third-quarter GDP data that showed the economy slowing, Chalmers said he wouldn’t be announcing major new policies in the update. “It will be a much smaller deficit, much smaller deficit, but we’re not yet ready to print a surplus for this year,” he said.

Australia posted its first surplus in 15 years in the 12 months through June this year as ultra-low unemployment and elevated commodity prices reduced costs and swelled revenue. Wednesday’s GDP report showed household spending stagnated last quarter in part because inflation and wage gains are pushing Australians into higher tax brackets and increasing their payments.

Household finances have also been hit by the Reserve Bank of Australia’s most aggressive policy tightening campaign in over 30 years to combat inflation. It kept the key interest rate unchanged at 4.35% this week after hiking last month for the 13th time since the cycle began in May 2022.

The RBA is trying to bring inflation back to its 2-3% target and monthly data released last week showed CPI cooled to 4.9% in October. Chalmers is trying to ensure fiscal policy is also playing its part by banking most of the extra revenue generated to avoid adding to demand.

The mid-year economic update will be defined by “responsible economic management,” Chalmers told Sky.