Markets Overview
- ASX SPI 200 futures down 0.8% to 7,803.00
- Dow Average down 1.3% to 38,600.88
- Aussie up 0.2% to 0.6580 per US$
- US 10-year yield fell 4.8bps to 4.2994%
- Australia 3-year bond yield rose 2.6 bps to 3.74%
- Australia 10-year bond yield rose 3.9 bps to 4.18%
- Gold spot down 0.7% to $2,284.50
- Brent futures up 1.5% to $90.73/bbl
Economic Events
- 11:00: (AU) Australia to Sell A$800 Million 2.5% 2030 Bonds
- 11:30: (AU) Feb. Imports MoM, prior 1.3%
- 11:30: (AU) Feb. International Trade Balance, est. A$10.5b, prior A$11b
- 11:30: (AU) Feb. Exports MoM, prior 1.6%
Stocks fell ahead of Friday’s jobs report as a rally in oil amid geopolitical tensions triggered a flight to the safest corners of the market. Treasuries climbed and the dollar ended near session highs.
The S&P 500 dropped 1.2%, erasing gains. Brent crude topped $90 a barrel as Israeli Prime Minister Benjamin Netanyahu said at a security cabinet meeting his country will operate against Iran and its proxies and will hurt those who seek to harm it. President Joe Biden told Netanyahu on a call that US support for his war would depend on new steps to protect civilians.
Bond yields dropped across the US curve — even after Federal Reserve Bank Minneapolis President Neel Kashkari said rate cuts may not be needed this year if progress on inflation stalls. He was among the more than a half-dozen central bank officials speaking ahead of the release of the March jobs data.
Healthy US employment gains likely continued in March while wage growth moderated, according to a Bloomberg survey of economists. Payrolls are seen increasing by at least 200,000 for a fourth straight month. Average hourly earnings are projected to climb 4.1% from the same month last year, the smallest annual advance since mid-2021.
Other News
Australian apartment approvals tumbled to a 12-year low in February as capacity constraints and rising costs weigh on construction — right at a time when a surging population requires more homes be built.
Private sector dwellings excluding houses plummeted 24.9% to 3,771, the fewest since January 2012, government data showed Thursday. Total building approvals — including houses — slid 1.9% in February while January’s result was downgraded to a 2.5% fall from 1% previously.
In total 12,520 dwellings were approved, almost half the March 2021 peak.
“We’re not seeing enough housing construction for how much demand we actually have,” said Diana Mousina, a senior economist at AMP Ltd. Annual approvals are close to 163,000, which is “just way too low because we need to be building about 240,000 homes a year to keep up with our population.”
The weakness in consents to build apartments and houses is running up against population gains fueled by immigration, resulting in house prices climbing despite interest rates at a 12-year high of 4.35%. Australia’s government has pledged to build 1.2 million new homes between July this year and mid-2029.
The capacity constraints reflect difficulty sourcing labor and rising prices for building materials as housing construction competes with massive infrastructure projects being undertaken by various levels of government.
Annual building approvals would need to climb to 400,000 by 2027 in order to meet the government’s target — “historically off the charts” for the industry, said Timothy Hibbert at Oxford Economics.
“Australia has a significant stock deficiency which is set to grow further in coming years. Beyond the approval stage, construction time-frames remain extended and will slow the addition of new projects to the housing stock,” he said.
(Bloomberg)
