Markets Overview

  • ASX SPI 200 futures up 0.3% to 8,083.00
  • Dow Average up 0.2% to 40,842.79
  • Aussie little changed at 0.6542 per US$
  • US 10-year yield fell 10.8bps to 4.0315%
  • Australia 3-year bond yield fell 23 bps to 3.76%
  • Australia 10-year bond yield fell 16 bps to 4.12%
  • Gold spot up 1.5% to $2,447.39
  • Brent futures up 2.7% to $80.72/bbl

Economic Events

  • 09:00: (AU) July Judo Bank Australia PMI Mfg, prior 47.4
  • 10:30: (AU) Australia to Sell A$1 Billion 56-Day Bills
  • 10:30: (AU) Australia to Sell A$1 Billion 133-Day Bills
  • 11:30: (AU) 2Q Import Price Index QoQ, est. -0.7%, prior -1.8%
  • 11:30: (AU) 2Q Export Price Index QoQ, est. -5.3%, prior -2.1%
  • 11:30: (AU) June Exports MoM, prior 2.8%
  • 11:30: (AU) June Imports MoM, prior 3.9%
  • 11:30: (AU) June International Trade Balance, est. A$5b, prior A$5.77b

Equities in Asia were primed to broadly track US stocks higher Thursday on firming signs the Federal Reserve will soon cut interest rates. Japan was an outlier as stock futures fell to reflect a stronger yen.

Share futures for Australia and Hong Kong climbed after the S&P 500 and the Nasdaq 100 both rose, helped along by sharp gains for big tech companies that extended into late trading. Nvidia Corp. surged 13% during the main session while Meta Platforms Inc. increased around 5% in post-market trade after beating sales forecasts. Contracts for US equities advanced in early Asian trading.

Wall Street gains were driven by signs the Fed will cut rates after leaving borrowing costs unchanged in its Wednesday meeting. Notably, the committee shifted to saying it is “attentive to the risks to both sides of its dual mandate,” rather than prior wording focused just on inflation. In a press conference, Fed Chair Jerome Powell said officials could cut rates “as soon as” September.

The Fed “has clearly telegraphed” a September rate cut, said Ronald Temple at Lazard Asset Management. Although “a July rate cut could have been justified by slowing inflation, easing labor market tightness, and moderating growth, I think the case will be even more compelling in seven weeks,” he noted.

Treasuries rallied across the curve, while an index of dollar strength had its worst day since May. The 10-year yield fell 11 basis points to 4.03%, a level not seen since February. Gains for US debt also reflected reports that Iran had ordered retaliation against Israel for the killing of a Hamas leader on its soil.

The drop in US yields added further fuel for a rally in the yen. The Japanese currency was steady in early Thursday trade after falling below 150 per dollar Wednesday, a level not seen since March, after the Bank of Japan raised rates and announced plans to cut bond purchases.

In Asia, economic data due for release Thursday includes Australian trade, Indonesia inflation and the China July Caixin manufacturing PMI.

Other News

Australian house-price growth slowed in July as elevated borrowing costs and stubbornly sticky inflation weighed on demand, with Melbourne declining for a fourth consecutive month.

Market bellwether Sydney advanced 0.3%, taking its median home value to a record high A$1.17 million ($780,000), property consultancy CoreLogic Inc. said Thursday. Brisbane climbed 1.1%, supplanting Canberra to become the second-most expensive market. Perth was the best performing capital with a 2% gain, while Hobart and Darwin fell, leaving an overall 0.5% increase in dwelling values in July.

“While the headline growth rate remains positive, it is clear momentum is leaving the cycle,” said Tim Lawless, research director at CoreLogic. He highlighted that the rolling quarterly pace of growth in Sydney eased to 1.1%, down 5% at the same time last year.

Australian property prices have generally defied the Reserve Bank’s restrictive monetary policy as limited supply and a surge in immigration growth has underpinned demand. But with prices in cities such as Sydney reaching eye-watering levels, the strength of the market is beginning to dissipate in the face of affordability issues.

CoreLogic’s national index has advanced 37.4% since the onset of Covid-19, despite the RBA’s 13 interest-rate increases between May 2022 and November 2023. Sydney climbed 28.7% during that period.

July’s data showed the value of apartments was rising at a faster pace than houses across most state and territory capitals.

“With stretched housing affordability, lower borrowing capacity and a lift in both investor and first home buyer activity, it’s not surprising to see the unit sector outperforming,” Lawless said.

Australia’s accommodation shortfall is particularly acute in Sydney, where buyers confront an average home cost at 13-times income. Lawless said the portion of household income required to service a new mortgage has likely risen further from record highs reached in March.

Thursday’s data comes just days ahead of the RBA’s August policy meeting when it’s expected to leave rates at a 12-year high of 4.35%. Data on Wednesday showed inflation remains elevated, suggesting policy will stay at current levels for a while yet.

“The outlook for the housing sector remains complicated,” Lawless said. “While constraints on new housing supply are likely to keep a floor under home prices and remain a feature of the market for some time yet, downside risks are growing.”