Markets Overview
- ASX SPI 200 futures down 0.8% to 8,282.00
- Dow Average down 0.5% to 43,920.17
- Aussie little changed at 0.6366 per US$
- US 10-year yield rose 5.1bps to 4.3219%
- Australia 3-year bond yield rose 11 bps to 3.83%
- Australia 10-year bond yield rose 8 bps to 4.26%
- Gold spot down 1.3% to $2,683.65
- Brent futures little changed at $73.58/bbl
Economic Events
A rally that shot the world’s biggest technology stocks to all-time highs hit pause Thursday as Wall Street held off on big bets ahead of the Federal Reserve’s policy meeting next week.
In afterhours trading, chip supplier Broadcom Inc. gained more than 5% on a better-than-expected profit in the fourth quarter as artificial intelligence demand helped bolster growth. A nearly $330 billion exchange-traded fund tracking the Nasdaq 100 rose 0.1%.
During the trading day, the tech gauge tumbled 0.7% while the S&P 500 fell 0.5% as traders weighed higher-than-expected jobless claims against too hot producer price data. The equity benchmarks had made strong gains in the prior session after an in-line US inflation report almost fully baked in bets on a quarter-point interest rate cut at the Fed’s Dec. 18 meeting.
Data showed initial jobless claims rose to 242,000 for the week ended Dec. 7, ahead of economists’ estimates for 220,000. November producer price readings released at the same time were mixed, with US wholesale inflation accelerating in November due to a surge in egg prices. Treasuries failed to hold onto an advance after the readouts as investors tried to gauge when the central bank will hit pause on interest-rate cuts.
“With high egg prices appearing to play a key role in the hotter-than-expected headline PPI, traders may be focusing more on the jump in jobless claims,” according to Chris Larkin at E*Trade from Morgan Stanley. While there’s been a steady stream of solid labor data, “the Fed is primed to be sensitive to any signs of a softening jobs picture.”
A third-consecutive rate cut from the US central bank is widely expected next week after the European Central Bank met expectations for a quarter-point of interest-rate easing and the Swiss National Bank made a surprising 50 basis-point rate reduction Thursday.
A Bloomberg gauge of the dollar strengthened 0.3%, advancing for the fifth consecutive session as traders gauged the prospect of a Fed pause in early-2025 while US bonds fell for the fourth day in a row. Treasuries have climbed immediately after readouts this week only to see those gains evaporate. The yield on the 10-year rose to 4.33% Thursday.
Stan Shipley at Evercore ISI expects the benchmark note to end 2025 around 4.6%.
“The uncertainty of the US economic outlook has increased even though the recession odds have vanished,” Shipley wrote. “This is because economic policy details are not clear.”
To Ella Hoxha, head of fixed income at Newton Investment Management, a “hawkish cut” from the Fed is possible next week. “In that setup, the risk is still that you price the Fed to be a bit more cautious rather than more dovish.”
