Markets Overview

  • ASX SPI 200 futures little changed at 7,564.00
  • Dow Average up 0.4% to 38,470.48
  • Aussie little changed at 0.6605 per US$
  • U.S. 10-year yield fell 1.5bps to 4.0586%
  • Australia 3-year bond yield fell 4 bps to 3.72%
  • Australia 10-year bond yield fell 7.5 bps to 4.14%
  • Gold spot up 0.1% to $2,036.14
  • Brent futures up 0.4% to $82.77/bbl

Economic Events

  • 11:30: (AU) Dec. Private Sector Credit YoY, prior 4.7%
  • 11:30: (AU) Dec. Private Sector Credit MoM, est. 0.4%, prior 0.4%
  • 11:30: (AU) 4Q CPI Trimmed Mean QoQ, est. 0.9%, prior 1.2%
  • 11:30: (AU) 4Q CPI Trimmed Mean YoY, est. 4.3%, prior 5.2%
  • 11:30: (AU) 4Q CPI Weighted Median QoQ, est. 0.9%, prior 1.3%
  • 11:30: (AU) 4Q CPI Weighted Median YoY, est. 4.5%, prior 5.2%
  • 11:30: (AU) Dec. CPI YoY, est. 3.7%, prior 4.3%
  • 11:30: (AU) 4Q CPI QoQ, est. 0.8%, prior 1.2%
  • 11:30: (AU) 4Q CPI YoY, est. 4.3%, prior 5.4%

A $246 billion exchange-traded fund tracking the Nasdaq 100 (QQQ) dropped in late hours after results from Microsoft Corp. and Alphabet Inc. sank two of the tech behemoths that have powered the rally in stocks.

Alphabet reported fourth-quarter revenue from its core search advertising business that fell short of analysts’ estimates, overshadowing an otherwise strong end to the year. Microsoft’s cloud growth disappointed some on Wall Street — even as the company posted its strongest revenue growth since 2022, spurred by interest in new artificial intelligence products.

Equities struggled for solid footing in regular trading, with traders also sifting through a batch of economic data and awaiting the Federal Reserve rate decision. Wall Street had to digest a hotter-than-estimated reading on job openings, which left investors guessing what Jerome Powell will say Wednesday as the market further trimmed bets on a March Fed cut.

Treasury two-year yields rose four basis points to 4.36%. Ten-year yields fell two basis points to 4.05%.

US job openings unexpectedly rose in December to the highest level in three months while fewer Americans quit their jobs. Tuesday’s data kicks off a slew of releases that will offer insights into the state of the labor market. A report due Wednesday is forecast to point to easing employment costs at the end of 2023, while the government’s jobs report Friday is projected to show US employers added around 185,000 positions in January.

Separate data showed US consumer confidence increased in January to the highest level since the end of 2021 as Americans grew more upbeat about the economy and the job market amid more sanguine views about inflation.

Other News

OUR TAKE: Underwhelming December retail sales were worse than a Black Friday hangover — Australia’s consumers are in trouble. Sales lurched down from November, and barely stayed above year-earlier levels even with a boost from inflation and strong population growth.

Looking ahead, there’s little reason for optimism over coming months. Households are still adjusting to the Reserve Bank of Australia’s November rate hike, and there are signs that population growth will slow in 2024. Both point to a challenging year ahead for retailers — and the economy.

  • Retail sales fell 2.7% from November, when they rose 1.6% on the back of a boost from Black Friday spending. The consensus forecast was for a 1.7% decline.
  • Retail sales were up just 0.8% from the year-earlier period. That’s a very weak outcome given working-age population growth of 3% and heated inflation over the year.
  • Indeed, per-capita retail sales (based on working-age population) were down 2.2% year on year — even before adjusting for inflation.
  • Looking ahead, the outlook is challenging for the first half of 2024. But there are cross-currents. The impact of 425 basis points of rate hikes by the RBA is damping demand. On a less negative note, the unemployment rate has been grinding higher but remains low. Solid wage growth and mid-year tax cuts should offer some support to spending.
  • Putting it all together, retail sales are likely to remain tepid until the RBA reverses course and cuts rates.

(Bloomberg Economics)