Markets Overview

  • ASX SPI 200 futures up 0.3% to 8,215.00
  • Dow Average up 0.8% to 42,352.75
  • Aussie down 0.8% to 0.6788 per US$
  • US 10-year yield rose 12.1bps to 3.9672%
  • Australia 3-year bond yield rose 6.6 bps to 3.61%
  • Australia 10-year bond yield rose 6.3 bps to 4.07%
  • Gold spot little changed at $2,653.60
  • Brent futures up 0.6% to $78.05/bbl

Economic Events

  • 11:00: (AU) Sept. Melbourne Institute Inflation, prior -0.1%
  • 11:00: (AU) Sept. Melbourne Institute Inflation, prior 2.5%

Most Asian stocks are set to open higher in early trading after strong US jobs data underscored the health of the world’s largest economy and boosted soft landing hopes.

Equity futures in Australia and Japan rose while those in Hong Kong slipped. US contracts edged higher early Monday after the S&P 500 rose 0.9% on Friday. The dollar was steady following its best week in two years as Treasury yields surged amid recalibrated bets on the size of the Federal Reserve’s next rate cut.

The so-called soft landing narrative has again taken over markets, pushing back concerns of a US recession after employers added 254,000 jobs in September — the most in six months  — and the jobless rate unexpectedly declined. A slew of other economic data last week — including private-sector job numbers and a measure of the services sector — painted a picture of a strong US economy.

“Tailwinds into Asia are probably more significant than anywhere else in the world” with the Goldilocks US economy and fresh Chinese stimulus, said Kyle Rodda, a senior analyst at Capital.com. “This is a very opportune time to reallocate to Asia given the fact there are signs of clear economic strength and therefore outperformance in cyclical sectors of which Asia is heavily weighted towards.”

Asian currencies, however, are set to further unwind last quarter’s rally after a gauge of the dollar climbed 0.4%, pressuring emerging market peers. The Korean won slumped more than 1% after the jobs report while currency forwards for the Indonesian rupiah, Philippine peso and Thai baht all fell, indicating early losses when spot markets reopen.

While expectations of the Fed slashing rates have adjusted, “more needs to be done,” said Win Thin, global head of markets strategy at Brown Brothers Harriman. “This week brings key U.S. inflation data that should help extend the dollar recovery and keep downward pressure on emerging market FX.”

Traders will soon shift to preparing for China’s reopening on Tuesday after stimulus measures announced prior to the Golden Week holiday lifted Hong Kong shares to their highest since March 2022. Officials from the National Development and Reform Commission will host a briefing on implementing incremental economic policies.

“The market will be keen to hear substance that could result in animal spirits, demand and consumption ramping up,” Chris Weston, head of research at Pepperstone Group said of the NDC meeting. “It’s hard to put into context the rally we’ve seen in these equity indices” and all have found strong buying support on the slightest pullback, he said.

Elsewhere in Asia, New Zealand bonds fell less than Treasuries as markets anticipate the nation’s central bank will cut interest rates by 50 basis points on Wednesday. Australia’s bond market was closed for a holiday in Sydney.

Oil drifted lower in early trading Monday as traders weighed Israel’s potential retaliation against Iran for a missile attack last week, with President Joe Biden discouraging a strike on Tehran’s crude fields.

This week, Germany is expected to downgrade its growth outlook while a slew of inflation readings in emerging markets are due. Minutes from the Fed’s September policy meeting will also be released as well as the September CPI print before the start of earnings season.

Other News

Australia’s promoter penalty regime could be expanded to capture others involved in designing and marketing tax exploitation schemes, a Treasury consultation paper published Friday said.

Treasury’s review progresses government reforms to “crack down on unethical tax avoidance behaviour” following the PricewaterhouseCoopers tax scandal, Assistant Treasurer Stephen Jones said in a press release Friday.

Promoter behaviors had evolved with social media and other technologies that had made tax misconduct easier, the paper said. The review seeks comments on whether the existing regime could deal with new emerging threats to the tax system and expand promoter penalty laws to capture lower-level promoter behavior, it said.

Tax evasion schemes had evolved to become more bespoke and complex, operate across jurisdictional boundaries and involve multiple intermediaries such as in marketing, design, facilitation and implementation of the schemes . Multiple tax intermediaries, like unregistered advisers, lawyers and digital service providers, could be involved in tax advice, the paper said.

“Is the current regime effective in capturing all parties involved in the promotion of tax exploitation schemes across multidisciplinary firms or other legal intermediaries?” it asked.

Marketing of bespoke, but similar, schemes to different taxpayers with similar circumstances is becoming more common the paper said. Treasury proposed clarifying the law so the Australian Tax Office could prosecute them as “one case spanning the pattern of a promoter’s behaviour over time.”

It also proposed giving the ATO more time to investigate and prosecute than the six-year time limit, the paper said.

The review also sought comment on whether exemptions to promoter penalty laws were adequate to safeguard tax practitioners providing genuine advice, Jones said.

Promotor penalties were increased in a bill passed in May.

The consultation closes on Nov. 1.