Markets Overview

  • ASX SPI 200 futures down 0.5% to 7,772.00
  • Dow Average down 0.1% to 39,291.97
  • Aussie little changed at 0.6741 per US$
  • US 10-year yield rose 1.8bps to 4.2959%
  • Australia 3-year bond yield fell 0.8 bps to 4.11%
  • Australia 10-year bond yield fell 1.5 bps to 4.34%
  • Gold spot up 0.2% to $2,363.84
  • Brent futures down 0.8% to $85.06/bbl

Economic Events

  • 11:00: (AU) Australia to Sell A$700 Million 3.75% 2034 Bonds

China-related shares were primed for gains Wednesday ahead of key economic data, while US equities touched a fresh peak as traders held to bets the Federal Reserve will cut rates this year.

Futures contracts for China and Hong Kong benchmarks climbed after mainland stocks and a gauge of US-listed Chinese shares rose on Tuesday. The S&P 500 gained for a sixth consecutive session, its longest winning streak since January, while the Nasdaq 100 also set a fresh record. Japanese and Australian equity contracts point to declines early Wednesday.

Shorter-term Treasuries outperformed on bets they would more likely benefit from policy easing. Fed chief Jerome Powell was careful not to offer a timeline for rate cuts in comments to lawmakers on Tuesday. However, he emphasized mounting signs of a cooling job market after government data showed a third straight month of rising unemployment.

Treasuries pared losses after a solid $58 billion sale of three-year notes, though a rout in European bonds kept a lid on the market. Swap traders continued to project two rate cuts in 2024.

Currencies held to muted moves. A gauge of dollar strength was rangebound, while the yen weakened slightly against the greenback. An index of emerging markets currencies was little changed Tuesday.

Other News

Australia’s consumer pessimism deepened as households worried about the prospect for further interest-rate increases, while business confidence rose to the highest level since early 2023.

A National Australia Bank Ltd. survey Tuesday showed business confidence jumped 6 points to 4 in June, driven by an increase in all industries but construction. Business conditions, which measure sales, employment and profitability, eased 2 points to 4, below their long-run average.

A separate household survey from Westpac Banking Corp. released an hour earlier showed consumer sentiment dropped 1.1% from June to 82.7 points in July, with pessimists heavily outweighing optimists. The index has held below 100 since March 2022.

“The July update shows that fears of persistent inflation and further interest-rate rises are again weighing more heavily on the consumer mood,” said Matthew Hassan, a senior economist at Westpac.

The two data sets show the divergence in sentiment for households and businesses in the face of still-elevated inflation and borrowing costs, suggesting corporate Australia is coping better, though the details in NAB’s survey pointed to weakness ahead.

Both labor and purchase costs growth eased while output price growth slowed too. Forward orders were flat and capex fell.

“Of note is the sharp decline in the employment index in the month,” said Gareth Pence, head of Australian economics at NAB. “While it’s only one month’s read, the employment index is now below its long-run average and may be signaling that the broader slowing in the economy is flowing through more strongly to labor demand.”

Overall, “our take on the survey is that it continues to signal another soft quarter” in the three months through June, Pence added.

Figures last month showed a partial gauge of consumer prices rose by more than expected for a third straight month in May, prompting money markets to price in odds of a rate hike this year.

The Reserve Bank of Australia next meets on Aug. 5-6, with some economists predicting it may tighten policy further to take the benchmark rate to 4.6% — a level not seen since October 2011. All eyes are on a second-quarter inflation report due July 31.

The Westpac index that tracks consumer expectations for variable mortgage rates over the next 12 months jumped 12.8%, marking the steepest monthly rise since the question was added to the survey at the start of 2022.