Markets Overview
- ASX SPI 200 futures down 0.5% to 7,950.00
- Dow Average down 0.4% to 40,712.78
- Aussie down 0.6% to 0.6706 per US$
- US 10-year yield rose 5.1bps to 3.8521%
- Australia 3-year bond yield fell 2.2 bps to 3.51%
- Australia 10-year bond yield fell 0.4 bps to 3.89%
- Gold spot down 1.1% to $2,484.52
- Brent futures up 1.5% to $77.17/bbl
Economic Events
- 11:00: (AU) Australia to Sell A$700 Million 2.75% 2028 Bonds
Asian equities faced early declines on Friday after markets adjusted wagers on the pace of US interest-rate cuts ahead of Jerome Powell’s Jackson Hole appearance.
Stock futures for Japan, Australia and Hong Kong dropped, echoing Thursday’s selloff in US stocks where both the S&P 500 and tech-heavy Nasdaq 100 indexes retreated. The yen was little changed early Friday ahead of an appearance of Bank of Japan’s Kazuo Ueda in parliament.
The 10-year yield rose five basis points and the policy-sensitive two-year yield climbed seven basis points, largely reversing the move from the prior session. An index of dollar strength rose Thursday, tracking the rise in yields.
The moves reflected pared bets on aggressive Federal Reserve rate cuts ahead of Powell’s Friday comments. Swaps pricing indicated three 25 basis point cuts across the remaining three Fed policy meetings this year, down from around four cuts priced in two days ago. The shift meant swaps traders no longer expect a 50 basis point cut in 2024.
“We are now once again not debating if they will cut, but by how much they will cut and how many times they will cut before year end,” said Kenny Polcari at SlateStone Wealth. “The US economy is not circling the drain – so there is no need to suggest that it is.”
In Asia, currency traders were priming for potential moves in the yen with Japanese inflation data due Friday. In addition, investors were bracing for potential surprises when BOJ Governor Ueda fronts Japanese lawmakers after hawkish rhetoric helped trigger a massive selloff in global stock markets earlier this month.
Other data releases in Asia include Taiwan industrial output and Singapore inflation.
Other News
The Australian Prudential Regulation Authority increased the additional capital requirements for ANZ Group Holdings Ltd., citing a lack of improvement in non-financial risk management.
Several issues emerging in the firm’s markets business have increased APRA’s concerns, according to a statement Friday. While ANZ has launched several investigations into these issues, they raise concern that the company hasn’t adequately addressed deficiencies in controls, risk culture, governance and accountability, the statement said.
“ANZ is financially sound with strong capital and liquidity levels,” APRA Chair John Lonsdale said in the statement. “However, weaknesses in managing non-financial risk can lead to detrimental financial impacts and APRA has no tolerance for such weaknesses persisting.”
The capital add-on was raised to A$750 million ($503 million), up from the previous amount of A$500 million.
“We have communicated our clear expectations to the ANZ board and executive team that these issues must be urgently reviewed to ensure underlying drivers are identified and addressed,” Lonsdale said. “Depending on the outcomes from ANZ’s independent review, APRA will consider whether further action is required.”
(Bloomberg)
