Markets Overview

  • ASX SPI 200 futures up 0.5% to 8,052.00
  • Dow Average up 0.6% to 41,335.05
  • Aussie up 0.2% to 0.6799 per US$
  • US 10-year yield rose 2.7bps to 3.8615%
  • Australia 3-year bond yield rose 0.7 bps to 3.55%
  • Australia 10-year bond yield rose 2.4 bps to 3.95%
  • Gold spot up 0.7% to $2,521.26
  • Brent futures up 1.8% to $80.08/bbl

Economic Events

  • 11:00: (AU) Australia to Sell A$700 Million 2.75% 2029 Bonds
  • 11:30: (AU) July Private Sector Credit YoY, prior 5.6%
  • 11:30: (AU) July Private Sector Credit MoM, est. 0.5%, prior 0.6%
  • 11:30: (AU) July Retail Sales MoM, est. 0.3%, prior 0.5%

Asian stocks are poised for gains on Friday as upbeat US growth data suggested the Federal Reserve is engineering a so-called soft landing for the economy.

Equity futures in Australia jumped while those in Japan edged higher. Contracts for US equities also gained after the S&P 500 closed little changed, weighed by Nvidia Corp. after its underwhelming earnings results. The Dow Jones Industrial Average closed at an all-time high, while the Nasdaq Golden Dragon Index – a gauge of Chinese shares listed in the US – climbed 2.6%.

A rally Friday will cap the best month for US and global stocks since June amid bets the Federal Reserve will ease policy as it tames inflation without the economy tumbling into recession. The US economy grew at a slightly stronger pace in the second quarter than initially reported, reflecting an upward revision to consumer spending that more than offset weaker activity in other categories.

“It looks to me like a healthy economy where the Fed can start cutting rates not because of recession risk, but because of disinflation,” Ron Temple, chief market strategist at Lazard Asset Management said on Bloomberg TV. “We’re decelerating from a very strong economy to a strong economy and I don’t see evidence of recession risk going up materially.”

Australian bonds edged lower, tracking US Treasuries which held losses after a $44 billion sale of seven-year notes was a bit soft. The yield on 10-year bonds advanced three basis points to 3.86%, leaving the spread between two-year notes — a closely watched gauge – just shy of regaining a normal, positive slope. Swap traders slightly trimmed bets on Fed easing, while still expecting around 100 basis points of cuts for 2024. The dollar is set to climb for the first week in five.

The message from the data “is ‘steady as she goes’,” said Chris Larkin at E*Trade. “The economy doesn’t appear to be falling off a cliff, and in the current market, good news is good. There was nothing here to make the Fed rethink its plan to cut rates next month.”

Other News

ANZ Group Holdings Ltd. Chief Executive Officer Shayne Elliott will face extensive public questioning from Australian lawmakers for the first time since a series of scandals over the bank’s bond trading business and wider culture.

Elliott will front the House of Representatives Economics Committee along with his peers from the nation’s four major banks in the final session of a two-day hearing. It’s part of an annual review into lenders that spans a wide range of topics from digital payments to regional branches and the impact of monetary policy.

Commonwealth Bank of Australia CEO Matt Comyn, who was first up on Thursday, said regulators have an “undue level of concern” about the big banks scrapping bonus caps when mortgage brokers never adopted such pay reforms. Later in the day, Westpac Banking Corp.’s Peter King criticized social media tech giants for being “missing in action” in closing the loop on scams. National Australia Bank Ltd. boss Andrew Irvine will kick off proceedings on Friday, followed by Elliott.

These hearings are “timely” in light of the corporate watchdog’s “suspicions of extraordinary conduct, potentially, by some ANZ bond traders,” Daniel Mulino, the committee’s chair, said Thursday.

Elliott’s answers to queries from the committee may shed light on how ANZ is tackling a series of allegations. The Australian Securities and Investments Commission has opened an investigation it expects will run into 2025 around the firm’s role in a Treasury bond sale last year, while the Australian Prudential Regulation Authority last week insisted on an independent audit of the allegations.

ANZ has admitted that it overstated its bond-trading volumes in reports it submitted to the government. The bank has engaged law firms to probe both matters, and pledged to hold people accountable for any wrongdoing it finds. It has suspended traders, and said its senior executives, including Elliott, could also face consequences. Action taken by the bank against staff related to cultural and conduct issues, a person familiar with the matter has said.

(Bloomberg)