Markets Overview
- ASX SPI 200 futures down 0.5% to 8,267.00
- Dow Average down 0.2% to 43,828.06
- Aussie little changed at 0.6363 per US$
- US 10-year yield rose 6.9bps to 4.3967%
- Australia 3-year bond yield rose 1.1 bps to 3.84%
- Australia 10-year bond yield rose 2.5 bps to 4.29%
- Gold spot down 1.2% to $2,648.23
- Brent futures up 1.5% to $74.49/bbl
Economic Events
- 09:00: (AU) Dec. S&P Global Australia PMI Servi, prior 50.5
- 09:00: (AU) Dec. S&P Global Australia PMI Compo, prior 50.2
- 09:00: (AU) Dec. S&P Global Australia PMI Mfg, prior 49.4
Asian stocks are set to fall on Monday ahead of a swath of Chinese data and a vow from the nation’s regulators to stabilize markets. South Korean assets will be closely watched after President Yoon Suk Yeol was impeached.
Equity futures in Australia, Hong Kong and mainland China pointed to losses while those in Japan gained. The S&P 500 pared initial losses on Friday ahead of a possible hawkish cut by the Federal Reserve later this week.
The moves came as investors readied themselves for the final full week of trading this year with a series of central bank meetings including the Fed, Bank of Japan and Bank of England. Traders may begin to take profit on this year’s almost 20% rally in global stocks, fueled by gains in US tech shares and euphoria over AI.
“The uncertainty this brings may initially result in further position squaring and limit buying activity in risk,” said Chris Weston, head of research at Pepperstone Group in Melbourne. “With developed market equities having already had such a year, throw in some big event risk and things a little funky for traders this week.”
Chinese stocks are expected to extend a selloff sparked Friday amid disappointment after Beijing pledged to boost consumption but failed to offer details on fiscal stimulus. Regulators at the weekend vowed more efforts to stabilize the property and equity markets, including increased monitoring of futures and spot trading, ahead of economic data set to be released that includes retail sales and industrial production.
The People’s Bank of China may also keep a cap on the yuan through its daily fixing as the currency faces pressure over the prospect of US tariffs, according to Commonwealth Bank of Australia.
“We expect the PBOC to keep fixing USD/CNY below 7.2000 to offset US dollar strength until there is more clarity on US tariffs,” strategists including Joseph Capurso wrote in a note to clients.
Elsewhere in Asia, the Bank of Korea pledged to use “all available policy instruments” to stabilize stock and currency markets after Yoon’s impeachment on Saturday over his short-lived attempt to impose martial law. Yoon is suspended from exercising presidential powers, and the constitution requires the prime minister to assume the role of acting president.
“Political turmoil will likely persist but unlikely to cause an extreme market reaction in USD/KRW and Korea rates,” Societe Generale analysts including Suktae Oh wrote in a note to clients. “All this political turmoil should result in monetary and fiscal stimulus actions in the early part of next year.”
Other News
China’s slowdown, weaker domestic growth and the need for additional spending in some areas are delivering headwinds for Australia’s economy, Treasurer Jim Chalmers said ahead of a budget update.
Chalmers will on Wednesday set out the country’s Mid-Year Economic and Fiscal Outlook, aiming to persuade voters that the center-left Labor government can spur expansion ahead of a national election that must be held by May 17.
“Challenges in the Chinese economy will have flow on effects for our own budget and that will be clear in Treasury’s forecasts,” Chalmers said Sunday in a statement. “The global economy is uncertain, the global outlook is unsettling and that’s weighing heavily on our economy.”
Policymakers in the world’s second-largest economy announced a raft of stimulus measures in September aimed at keeping China on track to hit its 2024 growth target of around 5%.
Still, weaker Chinese demand for commodities like iron ore means Australia’s Treasury will need to downgrade export earnings in the mid-year update by A$100 billion ($64 billion) over the four years to 2027-2028, according to a department spokesperson. Company tax receipts will also be revised down by A$8.5 billion over the same period.
Australia’s gross domestic product rose 0.8% last quarter from a year earlier, the weakest reading — excluding the pandemic — since December 1991, when the nation’s economy was in recession, according to official data released earlier this month.
Earnings from iron ore are forecast to decline on waning prices that have dropped about a quarter this year amid higher production and weaker demand because of the slump in China’s property sector. The value of shipments of coal and liquefied natural gas are also expected to fall, according to government projections.
“There will be substantial pressures on the budget,” Chalmers said Sunday in an interview with Sky News.
Australia’s government is handling the impact of higher spending on payments to military veterans and in areas including natural disasters, early childhood education and health, Chalmers said in the interview. The mid-year update will include details of an additional A$1.8 billion in entitlements to veterans, he said.
(Bloomberg)