Markets Overview

  • ASX SPI 200 futures up 0.3% to 7,510.00
  • Dow Average little changed at 37,897.22
  • Aussie little changed at 0.6580 per US$
  • U.S. 10-year yield rose 4.9bps to 4.1781%
  • Australia 3-year bond yield rose 1.9 bps to 3.81%
  • Australia 10-year bond yield rose 4 bps to 4.23%
  • Gold spot down 0.8% to $2,012.21
  • Brent futures up 0.6% to $80.03/bbl

Economic Events

  • 10:30: (AU) Australia to Sell A$1 Billion 130-Day Bills
  • 10:30: (AU) Australia to Sell A$1 Billion 74-Day Bills

US stock indexes ended Wednesday off session highs, after earnings-related optimism fueled by Netflix Inc. moderated and investors geared up for another batch of key quarterly results.

The S&P 500 was little changed when markets closed while the tech-heavy Nasdaq 100 jumped 0.5%. US Treasury yields rose, with the 30-year rate climbing to its highest level so far this year. The Bloomberg Dollar Spot Index trimmed earlier declines.

Investors are also getting ready to parse a slew of US economic data — including gross domestic product — on Thursday, while continuing to mull when the Federal Reserve will cut interest rates.

Earlier, Bank of Canada held its key interest rate at 5%, as expected, and signaled it’s done hiking. Also on the roster this week is European Central Bank’s policy meeting on Thursday. Euro-area bond yields slipped earlier after data showed business activity contracted in January for the eighth month.

Elsewhere, industrial metals prices received a boost after China signaled plans to stimulate its economy by cutting the reserve requirement ratio for banks. The move should allow Chinese banks to step up lending and their purchases of government bonds. The news also supported Brent crude around $80 a barrel.

Other News

The harsh economic reality confronting many Australians means Prime Minister Anthony Albanese is set to break a key campaign promise.

Australia will amend controversial legislated tax cuts by reducing the windfall for wealthy households to provide greater relief for low- and middle-income earners.

Under the original program, known as Stage 3, the 32.5% and 37% tax brackets were to be scrapped and a 30% rate applied to incomes of between A$45,000 ($30,000) and A$200,000. The top tax bracket of 45% would then kick in after that, compared with the current threshold of A$180,000.

Under Albanese’s plan to be announced Thursday, the 37% tax rate will remain in place for those earning A$135,000 or more and the top 45% rate will apply from A$190,000, or between the existing and previously proposed level.

In return, lower income earners will receive a larger benefit than originally intended. The bottom tax rate of 19% will be cut to 16% for incomes of up to A$45,000, with the 30% bracket then applying on earnings up to A$135,000.

Albanese said Wednesday his economic policy is designed to do “the right thing for the right reasons,” adding that a lot had changed in the world since the tax changes were legislated in 2019.

“My job is to respond, to seek advice, and then to make a difference,” he told reporters in Canberra. “To make the right decision, not the easy decision.”

Inflation in Australia remains higher than in many developed counterparts and while it has eased from a December 2022 peak, it’s proving sticky in some sectors. Surveys show the high cost-of-living among the most important issues to voters, with the price of food, energy and rent of particular concern.

In his speech on Thursday, Albanese will say the tax cuts are largely revenue neutral and will not worsen inflation, quoting advice from Australia’s Treasury Department.

The Stage 3 tax cuts were the third in a series of revenue reforms legislated by the center-right Coalition when it was in office. The first two rounds focused on low- and middle-income earners. Albanese promised to keep the tax changes ahead of the 2022 election, and repeatedly said after his victory that his position on the reforms hadn’t changed.

The opposition Liberal-National Coalition has pledged to reverse Albanese’s adjustments if it wins power at the next election. Shadow Treasurer Angus Taylor described the prime minister’s decision as the “mother of all broken promises,” drawing the battle lines for the campaign to come.