Markets Overview

  • ASX SPI 200 futures up 0.3% to 7,775.00
  • Dow Average little changed at 39,164.06
  • Aussie little changed at 0.6648 per US$
  • US 10-year yield fell 4.5bps to 4.2845%
  • Australia 3-year bond yield rose 6.9 bps to 4.17%
  • Australia 10-year bond yield rose 9.9 bps to 4.41%
  • Gold spot up 1.3% to $2,327.84
  • Brent futures up 1.3% to $86.36/bbl

Economic Events

  • 11:30: (AU) May Private Sector Credit YoY, prior 5.2%
  • 11:30: (AU) May Private Sector Credit MoM, est. 0.5%, prior 0.5%

The world’s largest bond market rose after the latest batch of economic reports reinforced speculation the Federal Reserve will be able to cut interest rates this year to prevent a bigger US slowdown.

Traders gearing up for the Fed’s favored inflation gauge piled into Treasuries as several data points illustrated a downshift in growth tied to the central bank’s higher-for-longer stance. The government marked down personal spending to an annualized 1.5% in the first quarter. Separate releases showed declines in orders and shipments of certain business equipment, weakness in the job market and a slide in homebuying.

Treasury 10-year yields fell four basis points to 4.29%. The S&P 500 fluctuated around 5,480.

Other News

Reserve Bank of Australia No. 2 Andrew Hauser said it would be a “bad mistake” to formulate policy off a single inflation report, pointing out there’s a suite of economic data still to come that will need detailed analysis.

“There’s a lot for us to reflect on ahead of the meeting in August,” Hauser, deputy governor at the RBA, said in response to a question in Sydney on Thursday. “It would be a bad mistake to set policy on the basis of one number and we don’t intend to do that.”

A gauge of consumer prices released this week showed inflation accelerated to 4% in May, well above the central bank’s 2-3% target. That prompted money markets to price in a 50-50 chance of an interest-rate hike at the RBA’s Aug. 5-6 meeting.

“The number we spent a bit of time talking about earlier is only partial and that’s something I’m not used to from the UK,” Hauser said in reference to the monthly consumer price indicator. “There’s a whole series of data coming out between now and when we meet in August.”

Hauser, a former Bank of England official, cited forthcoming reports on employment, retail sales, business surveys and a complete overview of consumer prices in the second-quarter inflation report due on July 31.

While the central bank has raised rates to a 12-year high of 4.35%, it has moved more cautiously than many international counterparts. That’s sparked questions over whether it has more to do on rates, especially when officials say they’re not ruling anything in or out on policy.

Australia is struggling with the so-called last mile of inflation. Hauser, asked earlier about persistent services prices, said it’s possible monetary policy is taking longer to feed through the economy, adding that a strong jobs market may also be a factor.

The deputy governor is a member of the RBA’s rate setting board. He was speaking at a Citigroup Inc. event.