Markets Overview
- ASX SPI 200 futures down 0.3% to 7,070.00
- Dow Average little changed at 34,500.66
- Aussie little changed at 0.6409 per US$
- U.S. 10-year yield fell 2.2bps to 4.2546%
- Australia 3-year bond yield fell 8.3 bps to 3.89%
- Australia 10-year bond yield fell 8.9 bps to 4.23%
- Gold spot little changed at $1,889.31
- Brent futures up 0.8% to $84.80/bbl
Economic Events
The dollar inched lower versus most of its major counterparts while Asian equity futures pointed to a cautious open to trading.
Investors will be focused Monday on Chinese interest rates and Beijing’s efforts to bolster the struggling economy, before attention shifts later in the week to a gathering of global central bankers at Jackson Hole, Wyoming.
The greenback’s early weakness followed small loses Thursday and Friday that trimmed what has still been five weeks of gains for a gauge of the currency’s strength. Contracts for shares benchmarks in Hong Kong and Australia fell while those for Japan were marginally higher.
US stocks gained some ground in the final minutes of Friday’s session in moves likely exacerbated by giant options expiration. But it wasn’t enough to prevent the S&P 500 ending unchanged and the Nasdaq 100 inching down. MSCI Inc.’s global equities benchmark notched its biggest weekly loss since the March meltdown of Silicon Valley Bank.
For American megacap tech stocks, it was the third straight weekly drop, the longest such streak in 2023, as fears of higher global interest rates weighed on sentiment while bonds bounced off multiyear lows.
While concerns of an imminent recession are fading, wary investors are instead facing entrenched inflation and the prospect of more policy tightening.
In China this morning, one-year and five-year prime loan rates are projected to be cut by 15-basis-points. Meanwhile, the central bank and financial regulators met with bank executives and told lenders again to boost loans, adding to signs of heightened concern about the economic outlook.
Elsewhere the pressure on rates is mostly upward, particularly in the US. The Treasury 10-year yield pulled back Friday from levels Thursday that were approaching the highest since 2007.
Other News
Australia’s aging population and the cost of servicing debt are among key factors that will blow out government spending by about A$140 billion ($89.7 billion) in the next 40 years, according to excerpts of a key report to be released in full Thursday.
The excerpts from the government’s Intergenerational Report, released Sunday, reveal the five fastest-growing spending pressures: health, aged care, the National Disability Insurance Scheme (NDIS), defense and interest payments on government debt.
“Combined, these spending categories are projected to increase by 5.6 percentage points of GDP over the 40 years from 2022–23 to 2062–63,” said an extract of the report emailed to Bloomberg. At the same time, income support and education payments are expected to grow in real per capita terms, but will decline as a share of GDP as the population ages, it said.
Interest payments on debt will rise from 0.7% of gross domestic product to 1.4% in the 40-year period, according to the excerpts.
Disability insurance and interest on government debt will be the fastest-growing categories over the next decade, while health and aged care are forecast to rise faster toward the end of the projection period as the population ages. Treasurer Jim Chalmers said the report showed the government’s budget is under intense pressure in the long term.
“We’re getting the budget in much better nick, but what the Intergenerational Report reveals is after this year, the pressure on the budget intensifies,” he said in an emailed statement.
(Blommberg)
