Markets Overview
- ASX SPI 200 futures up 0.2% to 7,718.00
- Dow Average up 0.8% to 39,115.34
- Aussie down 0.4% to 0.6532 per US$
- US 10-year yield fell 2.6bps to 4.2985%
- Australia 3-year bond yield fell 6.4 bps to 3.67%
- Australia 10-year bond yield fell 2.9 bps to 4.08%
- Gold spot down 0.1% to $2,157.50
- Brent futures up 0.6% to $87.41/bbl
Economic Events
- 11:00: (AU) Australia to Sell A$800 Million 2.75% 2035 Bonds
Stocks in Asia are set to rise after Wall Street traders sent US benchmarks to fresh all-time highs before the Federal Reserve decision.
Futures for indexes in Tokyo, Hong Kong and Sydney all pointed to gains. US equities erased early losses on Tuesday after a rebound in the “Magnificent Seven” cohort of tech megacaps, amid bets Nvidia Corp.’s new chips will keep fueling its stellar rally. Bonds also gained, while the Bloomberg dollar index climbed for a fourth day.
Investors should buy the dip in stocks in the case of pullbacks amid a backdrop of good economic growth and inflation normalization, according to Goldman Sachs Group Inc. strategists led by Christian Mueller-Glissmann.
“While equity momentum has somewhat supported broader risk appetite, we see limited implications of a continued reversal barring a material US rate shock,” they said.
The S&P 500 closed just shy of 5,180. Treasuries pushed higher, with a $13 billion sale of 20-year bonds drawing strong demand. The yen slid as the Bank of Japan refrained from signaling any future hikes after scrapping the last negative interest rate regime. Oil rose a second day.
Wall Street is divided on whether the US stock market’s meteoric rise has gone too far, too fast. The latest Bank of America fund manager survey showed that investors were split on whether or not artificial intelligence stocks are in a bubble — with 40% saying “yes” and 45% answering “no.”
The Fed is expected to hold rates steady for a fifth consecutive meeting on Wednesday, and attention will shift to the central bank’s projections in the so-called dot plot.
The summary of economic projections will reveal whether still-robust data are giving officials cause to dial back intentions to cut rates — or if their outlook for three reductions this year remains on track.
Other News
The likely lifting of the final major tariffs on Australian products by China in coming weeks will conclude a bitter three-year trade war. That alone is unlikely to usher in a new era in relations between the two countries.
Chinese Foreign Minister Wang Yi’s first trip to Australia in seven years to meet with his counterpart Penny Wong in Canberra on Wednesday is the latest sign of a tentative improvement in ties. During his trip, Wang will attend the Australia-China Foreign and Strategic Dialogue, which was postponed for years during a diplomatic deep freeze.
His visit comes just over a week after China announced it was considering lifting trade tariffs as high as 218% on Australian wine, removing the last major sanction imposed after relations frayed in 2020. But even as the economic disputes ease, some experts caution the overall relationship still faces headwinds from persistent political differences and increased competition between China and Australia’s principal ally, the US.
“They’ve tried to take the very obvious, in-your-face economic disputes off the table, but that doesn’t mean the two sides have kissed and made up in any fundamental sense,” said Richard McGregor, Senior Fellow for East Asia at the Lowy Institute think tank.
Australia and China have rapidly improved their diplomatic relations since the election of the center-left Labor government in May 2022, including the restoration of high-level official meetings and the lifting of trade sanctions imposed by Beijing at the height of tensions.
(Bloomberg)
