Markets Overview
- ASX SPI 200 futures up 0.5% to 8,850.00
- S&P 500 up 0.8% to 6,587.47
- Dow Average up 1.4% to 46,108.00
- Aussie up 0.7% to 0.6661 per US$
- US 10-year yield fell 2.5bps to 4.0206%
- Australia 3-year bond yield fell 2.3 bps to 3.42%
- Australia 10-year bond yield fell 3.8 bps to 4.23%
- Gold spot down 0.2% to $3,633.37
- Brent futures down 1.8% to $66.30/bbl
Economic Events
- 13:40: (AU) RBA’s Jones-Speech
RBA Assistant Governor (Financial System) Brad Jones speaks at an event in Sydney. SunCable, the $24 billion renewable energy project that seeks to link Australia and Asia, will focus on supplying local data centers for now, with a proposed power cable to Singapore seen as a longer-term option.
Asia was primed to join a global equity rally after a cooling labor market and in-line US inflation data clinched a path for the Federal Reserve to cut interest rates next week.
Equity index futures for Japan, Australia and Hong Kong all rallied early Friday, after the S&P 500 and Nasdaq 100 indexes climbed to fresh closing highs Thursday. A gauge of global stocks also hit a new record. Contracts for US equities were little changed in early Asian trading on Friday.
Microsoft Corp shares climbed in post-market trading after the tech giant and OpenAI said they had reached an agreement, while Adobe Inc. shares also advanced in extended trading after it gave a strong quarterly revenue outlook. Elsewhere, Hyundai Motor Co. said a battery plant that was raided by US immigration authorities is being delayed as the companies faced labor shortages.
US consumer price index showed core prices that strip out food and energy rose 0.3% in August and 3.1% from a year earlier, in line with forecasts. Alongside that report came jobless-claims figures, which jumped to the highest in almost four years, emboldening bets policymakers will cut rates next week in an effort to counter a rapid slowdown in the labor market.
“Inflation is relatively calm, which gives the Fed the flexibility to focus more on stemming ongoing weakness in the labor market,” said Skyler Weinand at Regan Capital. “We expect the Fed to cut 25 basis points next week and to follow through with another two 25 basis-point cuts this year.”
Treasuries climbed across the curve Thursday. The US 10-year yield fell two basis points. An index of the dollar fell. Gold whipsawed Thursday as the precious metal eclipsed its inflation-adjusted peak set in 1980 before ending lower on the day.
In Asia, data on the docket for release includes industrial production for Japan and inflation for India. Money supply and new loans data for China may be released any time through September 15.
In commodities, oil snapped a three-day winning streak as a worsening market outlook undercut concerns about potential geopolitical disruptions to supplies.
A slowing jobs market has prompted markets to price a more aggressive trajectory of policy easing. Swaps pricing indicates traders anticipate the equivalent of between two or three 25 basis point cuts through the end of the year.
“Right now, inflation is a key subplot, but the labor market is still the main story,” said Ellen Zentner at Morgan Stanley Wealth Management. “Today’s CPI may appear to offset yesterday’s PPI, but it wasn’t hot enough to distract the Fed from the softening jobs picture. That translates into a rate cut next week — and, likely, more to come.”
While there may be some murmurs within the Fed about the need for a 50 basis-point cut, an emergency-sized reduction is not required, said Seema Shah at Principal Asset Management. Jobless claims are still quite low compared to 2021 levels, while the broader economic activity data and earnings reports do not signal the US is approaching a recessionary tipping point.
“The claims data were arguably the bigger news,” said Tiffany Wilding at Pacific Investment Management Co. “We still expect the Fed to cut 25 bps next week, though 50 will likely be discussed. We continue to look for 75 bps of total cuts this year.”
