Markets Overview

  • ASX SPI 200 futures down 1.6% to 7,428.00
  • Dow Average down 1.9% to 38,067.64
  • Aussie down 1.3% to 0.6443 per US$
  • U.S. 10-year yield rose 13.3bps to 4.3124%
  • Australia 3-year bond yield rose 0.8 bps to 3.77%
  • Australia 10-year bond yield rose 1 bp to 4.17%
  • Gold spot down 1.4% to $1,991.70
  • Brent futures up 0.8% to $82.68/bbl

Economic Events

  • 11:00: (AU) Australia to Sell A$800 Million 1% 2030 Bonds

Wall Street got a reality check on Tuesday, with hotter-than-estimated inflation data triggering a slide in both stocks and bonds.

Equities pushed away from their all-time highs as the consumer price index topped estimates across the board. Treasuries sold off, with two-year yields hitting the highest since before the December central bank “pivot.” Swap traders ratcheted down their expectations for a Fed cut before July. The stock market’s “fear gauge” — the VIX — surged the most since October. And a measure of perceived risk in the US investment-grade corporate bond market soared — with three issuers getting sidelined.

The CPI data came as a disappointment for investors after a recent downdraft in price pressures that helped build expectations for rate cuts this year. The numbers also gave credence to the wait-and-see approach highlighted by Jerome Powell and a chorus of Fed speakers.

The S&P 500 fell 1.4%, dropping below 5,000 in its worst CPI day since September 2022. Rate-sensitive shares like homebuilders and banks sank, while Tesla Inc. led losses in megacaps. The Russell 2000 of small caps slumped about 4%. US 10-year yields climbed 14 basis points to 4.31%. The so-called real yield hit 2%. The dollar rose, driving gold under $2,000.

Other News

Producers and consumers of fossil fuels in Australia, one of the world’s coal and gas powerhouses, should pay a new climate levy under efforts to accelerate a transition to a greener economy, according to two former government advisers.

The charge would impact more than 100 businesses and be levied on each ton of pollution at a rate equivalent to the European carbon price, Rod Sims and Ross Garnaut of the pro-climate action think tank The Superpower Institute said Wednesday.

Their plan is aimed at generating an initial A$100 billion ($65 billion) a year to help fund deployments of renewable energy, improve power grids and underwrite new infrastructure to support the development of green export industries.

A current focus on managing domestic emissions is too narrow, according to Sims, a former head of the Australian Competition and Consumer Commission. “That gets rid of a little over 1% of world emissions,” he said in an interview. “On the other hand, if we make green iron and green aluminum, urea, silicon, aviation fuel, we can reduce world emissions by anywhere between 6% and 9%.”

The proposal is likely to stir fresh debate over climate policy in Australia, which in 2014 scrapped a short-lived carbon levy after fierce opposition from some sectors.

Prime Minister Anthony Albanese’s government legislated Australia’s first emissions targets — aiming to cut 43% from 2005 levels by 2030 — though has faced some criticism for not pushing for more aggressive curbs. At the same time, Albanese has seen opposition from groups in regional Australia, including farmers, who argue new power lines required to support clean energy are taking up agricultural land.

Sims will join with Garnaut, a former government adviser on climate change, to deliver a speech Wednesday to the National Press Club in Canberra calling for new incentives to boost early-stage investment in clean technologies, and to set out their plan for a carbon solutions levy.

“Some of these policies will seem controversial to some and may be rejected immediately, but today is the beginning of the debate, not the end,” Sims plans to say, according to a text of his speech.