Markets Overview

  • ASX SPI 200 futures up 0.3% to 7,760.00
  • Dow Average up 0.1% to 39,056.57
  • Aussie up 0.2% to 0.6621 per US$
  • US 10-year yield rose 3.6bps to 4.1879%
  • Australia 3-year bond yield rose 6.5 bps to 3.65%
  • Australia 10-year bond yield rose 7.1 bps to 4.02%
  • Gold spot up 0.7% to $2,172.38
  • Brent futures up 2.6% to $84.07/bbl

Economic Events

  • 10:30: (AU) Australia to Sell A$1 Billion 119-Day Bills
  • 10:30: (AU) Australia to Sell A$1 Billion 84-Day Bills

Stocks pushed away from their all-time highs amid a slide in a handful of big techs, with traders awaiting readings on inflation and retail sales for clues on the Federal Reserve’s next steps.

Equities struggled to gain traction after a rally that has defied every doomsday scenario on Wall Street. Despite the pause in gains on Wednesday, the S&P 500 remains in its longest stretch since 2018 without a decline of at least 2%, according to data compiled by Bloomberg.

The S&P 500 dropped to around 5,165, while the Nasdaq 100 underperformed. Tesla Inc. led losses in megacaps after an analyst downgrade. Treasuries stabilized after an auction of 30-year bonds drew strong demand, in marked contrast to Tuesday’s sale of 10-year notes.

Other News

Australia is pressing for a second consecutive budget surplus even as weakening commodity export prices and rising unemployment crimp revenue gains, Treasurer Jim Chalmers will say in a speech in Sydney.

Chalmers is delivering a pre-budget address to the Committee for Economic Development of Australia on Thursday, when he will highlight that a falling iron ore price means smaller revenue upgrades. He will also signal that the fiscal blueprint expected to be handed down on May 14 will contain a broader focus than inflation, as economic growth slows and a per capita recession deepens.

“In each of our first two budgets we benefited from more than A$100 billion in revenue upgrades. This year, we won’t see anything like that,” Chalmers said, according to an excerpt. “There will still be a primary focus, but not a sole focus, on inflation.”

Iron ore is closing in on a seven-month low and nearing the $100-a-ton level that might start to push out some high-cost production. Australia’s biggest export fell more than 4% in Singapore on Wednesday, extending a rout that’s seen it slump from more than $140 a ton early this year on fears over China’s demand prospects.

The center-left Labor government recorded Australia’s first budget surplus in more than 15 years in fiscal 2023, coming in at A$22.1 billion ($14.6 billion) thanks to an ultra-tight labor market and elevated commodity prices.

Chalmers had forecast a return to deficit in the current fiscal year, however with further revenue upgrades expected, many economists predicted another surplus was likely. At the budget update in December, the government estimated the deficit would be a razor-thin A$1.1 billion in fiscal 2024.

By banking revenue upgrades, Chalmers has been trying to avoid fueling inflation in Australia, which peaked at 7.8% in the last quarter of 2022. However with consumer prices now cooling and gross domestic product rising a meager 0.2% in the final three months of 2023, Chalmers is facing pressure from inside the government to switch to spending.

In per person terms, Australia’s GDP fell 0.3% from the third quarter and was 1% lower than a year earlier, the deepest downturn outside the pandemic since 1991, according to Bloomberg Economics. The jobless rate meanwhile has climbed to 4.1% from 3.4% in late 2022.

“While the labor market is still pretty resilient, it’s now softening, so we won’t get the very substantial revenue upgrades we’ve seen from outperforming expectations here,” Chalmers said.