Markets Overview

  • ASX SPI 200 futures down 0.8% to 7,659.00
  • Dow Average down 0.4% to 38,880.57
  • Aussie down 0.6% to 0.6581 per US$
  • US 10-year yield rose 10.4bps to 4.2942%
  • Australia 3-year bond yield rose 3.4 bps to 3.68%
  • Australia 10-year bond yield rose 4 bps to 4.06%
  • Gold spot down 0.5% to $2,163.03
  • Brent futures up 1.4% to $85.18/bbl

Economic Events

The world’s biggest bond market sold off after another hot inflation report reinforced bets the Federal Reserve will be in no rush to cut rates even as some areas of the economy show signs of sluggishness.

Treasury yields rose and stocks fell as the data underscored the Fed’s challenges in achieving its 2% inflation goal. Following the steps of the consumer-price data, the producer price index also signaled a pickup in cost pressures. In contrast, retail sales missed estimates. While it’s probably early to draw any conclusions, the set of figures raised some eyebrows about the specter of stagflation.

US 10-year yields climbed 10 basis points to 4.29%. Traders pared bets on Fed cuts in 2024, with swaps fully pricing in a first move in July. The S&P 500 fell to around 5,150 ahead of Friday’s options expiration — which has the potential to amplify volatility. The dollar rose. Oil topped $81.

Other News

The odds of a weather-roiling La Niña in the coming months are rising, elevating the risk of an unusually active Atlantic hurricane season.

The chances of La Niña, a cooling of the equatorial Pacific, rose to 82% for August, September and October, the US Climate Prediction Center said. Last month there was a 74% chance.

“The numbers edged upwards, not dramatically, and the timing still seems to be the same as to what we were predicting last month,” said Michelle L’Heureux, a forecaster with the center.

La Niña can lead to droughts in South America and California and more rain across parts of Indonesia and Australia. Currently a strong El Niño, or warming in the Pacific, is winding down. La Niñas often follow intense El Niños because of a phenomenon known as discharge, when heat on the equator migrates toward the poles and cold deep-ocean waters rise to take its place.