Markets Overview

  • ASX SPI 200 futures up 0.4% to 7,746.00
  • Dow Average little changed at 38,601.82
  • Aussie up 1.0% to 0.6566 per US$
  • U.S. 10-year yield fell 5.2bps to 4.1001%
  • Australia 3-year bond yield fell 5.7 bps to 3.63%
  • Australia 10-year bond yield fell 8.3 bps to 4.01%
  • Gold spot up 0.8% to $2,144.47
  • Brent futures up 0.9% to $82.81/bbl

Economic Events

  • 10:30: (AU) Australia to Sell A$1 Billion 77-Day Bills
  • 10:30: (AU) Australia to Sell A$1 Billion 140-Day Bills
  • 11:30: (AU) Jan. Investor Loan Value MoM, prior -1.3%
  • 11:30: (AU) Jan. Owner-Occupier Loan Value MoM, prior -5.6%
  • 11:30: (AU) Jan. Home Loans Value MoM, est. 2.0%, prior -4.1%
  • 11:30: (AU) Jan. Exports MoM, prior 1.8%
  • 11:30: (AU) Jan. Imports MoM, prior 4.8%
  • 11:30: (AU) Jan. International Trade Balance, est. A$11.5b, prior A$11b
  • 16:30: (AU) Feb. Foreign Reserves, prior A$89.4b

Wall Street traders breathed a sigh of relief, with Jerome Powell once again signaling that while a strong economy will keep officials on hold for now, he expects the Federal Reserve to cut rates this year.

Stocks and bonds rose as investors took his remarks as a “no news is good news” development. The Fed chief said he’s not looking for inflation to reach the central bank’s 2% target to start easing policy. New York Community Bancorp soared after raising over $1 billion in equity to shore up investor confidence.

During this congressional testimony, Powell also noted that the risk from commercial real estate is “manageable.” The Fed Chair also said that the central bank is likely to significantly change its plan to require large lenders to hold more capital — a move that would mark a major win for Wall Street giants.

The S&P 500 reclaimed its 5,100 mark, with tech shares leading gains. Nvidia Corp. climbed 3.5%. Treasury 10-year yields fell five basis points to 4.10%. The dollar dropped.

Other News

Australia’s economy slowed in the final three months of last year and a per capita recession deepened as higher rates and rising living costs dragged on household spending.

Gross domestic product advanced 0.2%, easing from an upwardly revised 0.3% in the prior quarter, Australian Bureau of Statistics data showed Wednesday. From a year earlier, the economy grew 1.5%, matching estimates, as did the quarterly change.

The annual result was the weakest, outside the pandemic, since the final quarter of 2000 and below the decade average of 2.4%. In per person terms, GDP fell 0.3% from the third quarter and was 1% lower than a year earlier, the deepest downturn, also outside of the Covid-era, since 1991, according to Bloomberg Economics.

The slowdown will likely increase pressure on the Reserve Bank to begin an easing cycle this year, after it left rates unchanged at its last two meetings while refusing to rule out a further hike.

“Household consumption growth continues to struggle against tight policy settings,” said Sean Langcake, head of macroeconomic forecasting for Oxford Economics Australia. “The Australian economy is in the midst of a cyclical low point, with policy settings and fast inflation curbing growth. Indeed, while growth has stayed in positive territory, it has slowed in each quarter.”

Wednesday’s data showed government spending and private business investment were the main drivers of growth, outpacing household consumption.

Government expenditure advanced 0.6% in the fourth quarter, adding 0.1 percentage point to GDP. Households salted away more cash, with the savings ratio climbing to 3.2% from an upwardly revised 1.9%, while their spending was little changed.

Government spending was driven by “benefits for households, with more spending on medical products and services and higher employee expenses across commonwealth departments,” Katherine Keenan, head of national accounts at the ABS, said in statement. A referendum for an Indigenous advisory body to Parliament “held during the quarter also contributed to the rise in employee expenses.”

Keenan said households raised their spending on essential items such as electricity and rent but “wound back” discretionary expenditure including hotels, cafes and restaurants.

The RBA predicts annual economic growth will trough at 1.3% in the middle of this year, before regaining momentum as its estimates assume a lower cash rate from then on.

Treasurer Jim Chalmers said the economy’s ability to generate growth is still “significant” given high interest rates locally and a challenging global backdrop.

“Addressing inflation is still our primary concern, but these numbers show that the balance of risks in our economy are shifting from inflation to growth,” he said.

The GDP data also showed:

  • Strong population growth saw GDP per capita fall for a fourth consecutive quarter
  • Inventories slipped as imports of consumption goods like food, clothing, electrical items and cars fell 5.4% during the quarter
  • Spending on overseas travel dropped 9%, reflecting a shift toward destinations closer to home, led by New Zealand and Indonesia
  • On the other hand, spending by visitors to Australia rose 1.2% to now be above pre-pandemic levels
  • Spending on new warehouses and data centers drove a 5% rise in non-dwelling building construction