Markets Overview
- ASX SPI 200 futures down 1.1% to 7,929.00
- Dow Average down 1.3% to 40,665.02
- Aussie down 0.3% to 0.6706 per US$
- US 10-year yield rose 4.5bps to 4.2021%
- Australia 3-year bond yield rose 1.6 bps to 3.98%
- Australia 10-year bond yield fell 1.4 bps to 4.24%
- Gold spot down 0.6% to $2,445.09
- Brent futures down 0.4% to $84.78/bbl
Economic Events
- 11:00: (AU) Australia to Sell A$700 Million 2.75% 2027 Bonds
Asian equities were primed to track US stocks by notching a second day of declines as signs of economic weakness overwhelmed the market’s optimism surrounding rate cuts.
Equity futures for Japan, Australia and Hong Kong dropped. The S&P 500 fell 0.8% Thursday, extending a drop from the prior session and on track for its largest weekly fall since April. The Nasdaq 100 fell 0.5%, while the Russell 2000 benchmark of US small companies fell 1.9%, pulling back from a rally earlier in the week as investors rotated from large technology stocks. US equity futures edged higher early Friday.
The sudden pivot from chip companies that has swept global equity markets on signs the US would impose fresh restrictions on sales to China also began to abate. An index of such firms that includes Nvidia Corp. and Advanced Micro Devices Inc. rose 1.7%, easing its 6.8% drop the prior day. Broadcom Inc. closed higher on a report it has discussed making a chip for OpenAI. Taiwan Semiconductor Manufacturing Co.’s US-listed shares rose on a stronger revenue outlook.
Treasury 10-year yields rose four basis points to 4.20% Thursday. Australian yields echoed the move early Friday while those for New Zealand were little changed.
Other News
Australia added more than twice the number of jobs economists expected in June, highlighting the resilience of the country’s labor market to elevated interest rates.
The currency rose and the yield on policy sensitive three-year bonds climbed after official data Thursday showed employment grew by 50,200 roles — driven by full-time jobs. Economists had forecast a gain of 20,000. The jobless rate ticked up to 4.1% as more people sought work.
Money markets see an almost one-third chance of an interest-rate hike on Aug. 6, up from a roughly one-in-four chance prior to today’s data release. Stocks extended losses.
The report comes ahead of the Reserve Bank of Australia’s August board meeting, 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.
Bjorn Jarvis, ABS head of labor statistics, noted that the employment-to-population ratio and participation rate were both near 2023 highs, suggesting the labor market remains tight even though the jobless rate has ticked up.
Thursday’s data follows stronger-than-expected retail sales earlier this month and still-resilient business confidence, indicating Australia’s economy is coping well with the RBA’s hikes so far. The central bank has raised rates by 4.25 percentage points between May 2022 and November 2023 to take the cash rate to a 12-year high of 4.35%.
Despite the tightening, price pressures remain persistent and at 3.6%, inflation is still well above the RBA’s 2-3% target band.
“If we get that stronger CPI on July 31 then you could see another hike at the August meeting,” said Diana Mousina, deputy chief economist at AMP Ltd. “It’s definitely a live meeting.”
