Markets Overview

  • ASX SPI 200 futures down 0.3% to 7,613.00
  • Dow Average up 0.2% to 37,798.97
  • Aussie down 0.6% to 0.6401 per US$
  • US 10-year yield rose 6.5bps to 4.6674%
  • Australia 3-year bond yield rose 4.8 bps to 3.89%
  • Australia 10-year bond yield rose 6.8 bps to 4.33%
  • Gold spot little changed at $2,382.72
  • Brent futures down 0.2% to $89.96/bbl

Economic Events

  • 10:30: (AU) March Westpac Leading Index MoM, prior 0.08%
  • 11:00: (AU) Australia to Sell A$800 Million 3% 2033 Bonds

Stocks in Asia were set for a mixed open following hawkish comments by Jerome Powell that helped fuel a third straight drop in the S&P 500 and saw two-year Treasury yields briefly hit 5%.

Futures for benchmarks in Australia and Hong Kong indicated declines, while those for Japan pointed higher. US yields climbed to fresh 2024 highs as the Federal Reserve chief said it will likely take longer to have confidence on inflation — adding that it’s appropriate to give restrictive policy time to work. The dollar had its best five-day gain since October 2022, while the slide in US stocks from a record deepened.

Powell’s remarks represented a shift in his message after a a key measure of inflation exceeded forecasts for a third straight month. He also signaled the US central bank will likely keep rates on hold for longer than originally planned, according to Jeffrey Roach at LPL Financial.

The S&P 500 dropped to around 5,050, with the Golden Dragon index of US-listed Chinese companies also posting its third daily loss. US 10-year yields rose seven basis points to 4.67%.

Other News

The Solomon Islands goes to the polls today and analysts say Prime Minister Manasseh Sogavare faces an uphill battle for reelection, with potential implications for China’s position in the South Pacific.

Voting begins at 7 a.m. local time in the Pacific nation of 992 islands and just over 720,000 people, in a ballot that was delayed by Sogavare’s government. It argued the country couldn’t conduct an election while simultaneously holding the Pacific Games in 2023, and put off the polls until now.

The election will be closely monitored in capitals including Washington, Beijing and Canberra, said Tarcisius Kabutaulaka, a specialist in Solomon Islands politics at the University of Hawaii. While domestic issues will be key to voters’ choices, the result will have repercussions for the islands’ ties with China.

Sogavare in 2019 switched his nation’s diplomatic recognition to China from Taiwan, leaving Taipei increasingly isolated in the Pacific and beyond. That was followed in April 2022 by the announcement that Sogavare had signed a security agreement with China, setting off alarm bells in Australia and the US. One potential rival, Peter Kenilorea Jr, told the Solomon Star he would consider re-establishing ties with Taiwan.

“If Sogavare comes back, I think that relationship is going to be strengthened and we will see more Chinese influence, Chinese involvement, which will make our friends in Washington DC run around the White House 10 times,” the analyst said.

The Solomon Islands has long links with Australia and the US that date back to World War II. However in recent times China has expanded its diplomatic and economic footprint in the Pacific region, including the Solomons.

Although no final version of the security deal between China and Sogavare was released, a leaked draft showed Chinese military vessels would have safe harbor just 2,000 kilometers (1,200 miles) from Australia’s coast and in the middle of a key maritime corridor. Sogavare had said the pact doesn’t allow the establishment of a military base.

Kabutaulaka said there’s a “possibility” Sogavare could be reelected, though there are a number of other potential candidates for prime minister. He said it’s unlikely any single party will win majority government, meaning negotiations for the leadership are almost inevitable.

No result is expected Wednesday as vote counting will likely take a few days.

“Chaos is going to happen when those elected come to Honiara,” he said, referring to the first meeting of lawmakers in the capital after the ballot.

Given the uncertainty, there is also a chance of social unrest following the vote, Anouk Ride, an Australian National University research fellow, said in a podcast with the Lowy Institute think tank. Australia said Tuesday that it was deploying police and defense personnel to help out ahead of the vote.

“We just hope that the vote will be relatively clear,” Ride told the Lowy Institute. “And there won’t be narratives of foreign interference or foreign money flying around, so that the next prime minister will have a good mandate on which to govern.”