Markets Overview
- ASX SPI 200 futures up 0.5% to 8,025.00
- Dow Average up 1.1% to 41,175.08
- Aussie up 1.3% to 0.6790 per US$
- US 10-year yield fell 5.3bps to 3.7990%
- Australia 3-year bond yield rose 3.4 bps to 3.55%
- Australia 10-year bond yield rose 3.4 bps to 3.92%
- Gold spot up 1.1% to $2,512.59
- Brent futures up 2.3% to $79.02/bbl
Economic Events
Most Asian stocks look poised to gain early Monday, after Wall Street was cheered by signals from Federal Reserve Chair Jerome Powell that US interest rates will be cut from next month.
Futures show Hong Kong and Sydney equity benchmarks rising, though Tokyo shares may edge lower. Most regional bourses are expected to benefit from Powell’s Jackson Hole speech on Friday, when he said the “time has come” to pivot to monetary easing. US equity contracts were steady in early trading.
Traders will also be closely watching rising tensions in the Middle East, with Israel bracing for an expanded conflagration that could involve Iran and its allied militias. Oil rose 0.5% early Monday.
While markets had already priced in the start of policy easing in September, investors welcomed Powell’s comments. All major groups in the S&P 500 gained, with the gauge up over 1%. An MSCI index of global shares hit an all-time high. The Bloomberg “Magnificent Seven” gauge of megacaps rose 1.7%. The Russell 2000 of small firms jumped 3.2%.
Some Fed watchers indicated there were some devils in the details of Powell’s speech. While he acknowledged recent progress on inflation and saw the economy growing at a “solid pace”, it was his emphasis on the “cooling labor market” that got the attention of many market observers. Basically, it was seen as an indication the Fed will do whatever it can to avoid a pronounced slowdown.
“The market should be happy with this speech because it wasn’t hawkish in any way, gave the green light for 25 basis-point rate cuts — and left the door open for even larger cuts if that becomes necessary,” said Chris Zaccarelli at Independent Advisor Alliance.
Swap traders on Friday were pricing in 102 basis points of easing this year, which implies a reduction at every remaining policy meeting through December, including one jumbo 50-basis-point cut. A rally in Treasuries was led by shorter maturities, with the two-year yield breaking below 4%. The dollar lost 1%.
