Markets Overview

  • ASX SPI 200 futures up 0.2% to 8,859.00
  • S&P 500 up 1.1% to 6,445.76
  • Dow Average up 1.1% to 44,458.61
  • Aussie up 0.3% to 0.6530 per US$
  • US 10-year yield little changed at 4.2888%
  • Australia 3-year bond yield fell 1.1 bps to 3.39%
  • Australia 10-year bond yield fell 0.5 bps to 4.24%
  • Gold spot up 0.2% to $3,348.09
    Brent futures down 0.8% to $66.13/bbl

Economic Events

  • 11:00: (AU) Australia to Sell A$1.2 Billion 4.25% 2035 Bonds
  • 11:30: (AU) 2Q Wage Price Index QoQ, est. 0.8%, prior 0.9%
  • 11:30: (AU) 2Q Wage Price Index YoY, est. 3.3%, prior 3.4%
  • 11:30: (AU) 2Q Owner-Occupier Loan Value QoQ, prior -2.5%
  • 11:30: (AU) 2Q Home Loans Value QoQ, est. 2.0%, prior -1.6%
  • 11:30: (AU) 2Q Investor Loan Value QoQ, prior -0.3%

Australia’s central bank chief signaled a “couple more” interest-rate cuts will be required to achieve its latest forecasts after the policy board eased as anticipated on Tuesday. Commonwealth Bank of Australia is set to report FY results.

 

Stocks in Asia were set to track Wall Street higher after an in-line US inflation reading bolstered speculation the Federal Reserve will have room to cut rates in September.

Equity-index futures showed benchmarks in Tokyo, Hong Kong and Sydney will all open higher. US indexes climbed more than 1%, with the S&P 500 and the Nasdaq 100 hitting all-time highs. While an initial rally in Treasuries faded, money markets priced in an about 90% chance of a Fed reduction next month. Two-year yields, more sensitive to imminent policy moves, slid four basis points to 3.73%. The dollar fell.

The data bolstered expectations that the Fed can move toward rate cuts without reigniting price pressures. While underlying inflation accelerated to the strongest since the start of the year, the modest gain in goods prices eased fears that trade-related costs may feed into broader price pressures.

“Inflation is on the rise, but it didn’t increase as much as some people feared,” said Ellen Zentner at Morgan Stanley Wealth Management. “In the short term, markets will likely embrace these numbers because they should allow the Fed to focus on labor-market weakness and keep a September rate cut on the table.”

Fed Bank of Richmond President Tom Barkin said uncertainty over the direction of the economy is decreasing, but it’s unclear whether the central bank should concentrate more on controlling inflation or bolstering the job market.

In a social media post, President Donald Trump resumed his criticism of Jerome Powell over the central bank’s decision to hold rates steady. Trump also said he is weighing a lawsuit against the Fed chief over the renovation of the central bank’s headquarters – a project whose cost overruns have drawn scrutiny.

“The Fed’s policy stance is highly data-dependent, and with inflation contained and labor market softness increasingly evident in revised payroll data, the emphasis will now be skewed toward employment,” said Alexandra Wilson-Elizondo at Goldman Sachs Asset Management. “This inflation print supports the narrative of an insurance rate cut in September, which will be a key driving force for the markets.”

The Fed has kept rates unchanged this year in hopes of gaining clarity on whether tariffs will lead to sustained inflation. At the same time, the labor market — the other half of their dual policy mandate — is showing signs of losing momentum.

With risks to the labor market rising, the Fed would likely tolerate temporarily higher-than-expected inflation prints — provided that the risk of second-round effects remains contained and price expectations stay well-anchored, according to Marco Casiraghi at Evercore.

“I think the real thing now to think about is should we get a 50 basis-point rate cut in September,” Treasury Secretary Scott Bessent told Fox Business. He said the Fed could have cut rates in June or July if they’d had the “original” jobs reports numbers.

With CPI out of the way, the focus will shift to Friday’s US retail sales figure, where investors will see if consumers appear as upbeat as corporate earnings commentary has made them seem and amid worries about the labor market, according to Bret Kenwell at eToro.

In Asia, China will implement more levies on Canadian rapeseed after an anti-dumping probe, escalating a trade spat that’s disrupted crop flows.