Markets Overview

  • ASX SPI 200 futures up 0.8% to 7,373.00
  • Dow Average up 0.4% to 37,405.70
  • Aussie up 0.1% to 0.6561 per US$
  • U.S. 10-year yield rose 3.7bps to 4.1401%
  • Australia 3-year bond yield rose 5.7 bps to 3.84%
  • Australia 10-year bond yield rose 5.4 bps to 4.26%
  • Gold spot up 0.7% to $2,019.85
  • Brent futures up 1.5% to $79.05/bbl

Economic Events

A rally in some of the world’s largest technology companies fueled a rebound in stocks, with traders also weighing the latest economic data and Fedspeak for clues on the US central bank’s next steps.

After a back-to-back slide, the S&P 500 rose as bond-market volatility abated. The Nasdaq 100 closed at an all-time high as Apple Inc. climbed on an analyst upgrade and Taiwan Semiconductor Manufacturing Co.’s outlook lifted chipmakers on hopes for a global tech recovery in 2024.

Stock traders were unfazed by data underscoring labor-market strength at a time when Fed officials are looking for signs of a slowdown as they contemplate cutting rates.

The S&P 500 closed at 4780.94, while the Nasdaq 100 1.5%. A gauge of chipmakers climbed almost 3.5%. Treasury two-year yields remained around 4.35%. Oil rose to $74 a barrel.

Other News

Australia’s job market ended a strong 2023 on a weak note. The year ahead is likely to be on the softer side as weakening labor demand comes to the fore — albeit not to the extent suggested by the surprisingly sharp lurch down in December.

We expect the unemployment rate to rise further in 2024. The inflow of new workers into the economy is set to slow. Labor demand is on track to slow even faster as the economy decelerates. For the Reserve Bank of Australia, this will be a compelling reason to reverse course and start cutting rates as soon as the second quarter.

  • Employment fell by 65,100 positions (or -0.5%) in December, following a strong increase in October (+44,200) and November (+72,600). The December decline was well below our, and the consensus, forecast for a 15,000 gain.
  • The unemployment rate held at 3.9%, despite the slump in employment, thanks to an unexpected drop in participation. The jobless rate has been trending higher since it bottomed at 3.4% in October 2022, and stands at its highest level since May 2022.
  • The broader underemployment rate held at 6.5% in December, matching August’s 18-month high, as hours worked fell at a slightly faster pace than the decline in jobs.
  • Looking ahead, leading indicators point to a further softening in labor demand. We see the unemployment rate pushing higher through 2024 against the backdrop of rapidly growing labor supply. We see the rate rising to 4.8% by 2Q25.