Markets Overview

  • ASX SPI 200 futures down 0.4% to 7,323.00
  • Dow Average down 0.4% to 37,218.13
  • Aussie down 0.6% to 0.6543 per US$
  • U.S. 10-year yield rose 4.2bps to 4.1000%
  • Australia 3-year bond yield rose 5.5 bps to 3.79%
  • Australia 10-year bond yield rose 5.9 bps to 4.21%
  • Gold spot down 1.1% to $2,005.68
  • Brent futures down 0.3% to $78.08/bbl

Economic Events

  • 10:30: (AU) Australia to Sell A$1 Billion 63-Day Bills
  • 10:30: (AU) Australia to Sell A$1 Billion 126-Day Bills
  • 11:00: (AU) Jan. Consumer Inflation Expectation, prior 4.5%
  • 11:30: (AU) Dec. Full Time Employment Change, prior 57,000
  • 11:30: (AU) Dec. Part Time Employment Change, prior 4,500
  • 11:30: (AU) Dec. Employment Change, est. 15,000, prior 61,500
  • 11:30: (AU) Dec. Participation Rate, est. 67.1%, prior 67.2%
  • 11:30: (AU) Dec. Unemployment Rate, est. 3.9%, prior 3.9%

Stocks joined losses in risk assets as bond yields climbed on speculation the Federal Reserve will be in no rush to cut interest rates as the economy shows signs of resilience.

At a time when good economic news is not really that great from a policy perspective, a solid reading on retail sales fueled concern about Wall Street’s bold dovish bid. And with central bank officials recently striking a more cautious tone about prospects for easing, it ended up being the perfect recipe for traders to push back the timing for the first Fed move — assigning lower odds of a rate reduction in the first quarter.

Strong consumer spending helped propel the economy in recent weeks, the Fed said in its Beige Book survey. Fed swaps now show the probability of easing as soon as March dropping to around 50% — compared with 80% on Friday. The move also reflected a slide in UK bonds after data showed inflation picked up — making traders pare their bets on Bank of England easing.

US retail sales rose at the strongest pace in three months in December, capping a solid holiday season that suggests consumer resilience heading into the new year. Separate data showed homebuilder sentiment climbed January by the most in nearly a year as lower mortgage rates boosted customer traffic, sales and the demand outlook.

Treasury two-year yields topped 4.3%. The dollar rose. The S&P 500 extended its 2024 losses. Wall Street’s “fear gauge” — the VIX — hit the highest since November.

Other News

The notion that China’s economy has peaked is “flawed” because of the untapped potential of Chinese consumer demand, according to Kevin Rudd, former prime minister of Australia.

“I’ve never really accepted the thesis that you see written in various parts of the world about peak China — that somehow China’s economy is peaking, slowing and then heading toward something worse,” Rudd told a panel at the World Economic Forum in Davos on Wednesday.

“As long as the Chinese consumer has confidence in the future, then the economy will continue to grow reasonably well,” said Rudd, who currently serves as Australia’s ambassador to the US and has analyzed China for about four decades. The key challenge for policy makers is restoring domestic consumer confidence, he said.

“The Chinese consumer is the best guarantor of China’s economic future,” Rudd said. The scale of the Chinese consumer market is “unprecedented” in global economic history, he added.

The world’s second-biggest economy saw a brief post-pandemic rebound in early 2023 that ran out of steam within months as a lack of confidence among households and businesses hit consumption. Data on Wednesday showed that while China hit its official growth target for the year, a measure of broad price changes showed the longest deflation streak since 1999.