Markets Overview
- ASX SPI 200 futures down 0.5% to 8,122.00
- Dow Average up 0.4% to 42,498.32
- Aussie up 0.4% to 0.6243 per US$
- US 10-year yield rose 4.1bps to 4.5561%
- Australia 3-year bond yield rose 13 bps to 3.94%
- Australia 10-year bond yield rose 13 bps to 4.41%
- Gold spot up 0.5% to $2,597.39
- Brent futures down 0.9% to $72.71/bbl
Economic Events
- 11:00: (AU) Australia to Sell A$700 Million 2.25% 2028 Bonds
- 11:30: (AU) Nov. Private Sector Credit YoY, prior 6.1%
- 11:30: (AU) Nov. Private Sector Credit MoM, est. 0.5%, prior 0.6%
US stocks ended a choppy session with modest losses, struggling to rebound from the selloff they suffered after the Federal Reserve dialed back rate-cut expectations for next year.
The S&P 500 gave up earlier gains to end the day little changed. The Nasdaq 100 dropped 0.5% after oscillating between small advances and declines for most of the session.
The US 10-year Treasury yield rose to 4.57%, a level last seen in May. A Bloomberg dollar index continued to hover around 2022 highs. The yen remained lower after the Bank of Japan left borrowing costs unchanged earlier. Mexico’s peso shrugged off losses after the country’s central bank delivered a fourth consecutive rate cut.
The US economy remains resilient, as data on Thursday continued to prove. Notably, one of the Fed’s preferred gauges of inflation was revised up to 2.2%. Given that Chair Jerome Powell said future easing would require fresh progress on inflation, markets will now be closely watching the last noteworthy piece of data for the year — personal consumption expenditures for November — due Friday.
For now, investors are being defensive, said Matt Maley, chief market strategist at Miller Tabak + Co.
“They’re not jumping back into the market with both feet,” he said. “So, if we don’t get some relief from the bond market soon, there might not be a Santa Claus rally this year.”
Markets were jolted after the Fed scaled back the number of cuts it anticipates in 2025 to two. The so-called hawkish pivot was likely what the central bank had planned for next year before the meeting, according to Evercore ISI’s Krishna Guha. Powell said on Wednesday that some policymakers had begun to weave into their forecasts the potential impact of higher tariffs that President-elect Donald Trump may implement.
“To a large degree the Fed decided to pad its forecast and pre-position for Trump – pulling forward much of what would otherwise have been a hawkish update in March,” Guha wrote in a note.
That makes the Fed’s pronouncement of a new phase of policy “hawkish absolutely, but not as hawkish as it looked,” Guha wrote. He’s expecting the US central bank to skip a rate cut in January unless cracks appear in the labor market.
The swaps market is now implying fewer than two quarter-point reductions for the entirety of 2025, even less than what was implied in the Fed’s so-called dot plot on Wednesday.
Traders also parsed gross domestic product numbers on Thursday. The data showed that the US economy expanded at a faster clip in the third quarter than previously expected. Consumer spending was also marked up. Applications for US unemployment benefits fell last week amid volatility seen during the holiday season. Existing-home sales in the US topped a rate of 4 million in November for the first time in six months.
