Markets Overview
- ASX SPI 200 futures up 0.5% to 6,911.00
- Dow Average up 1.3% to 32,812.50
- Aussie up 0.4% to 0.6950 per US$
- U.S. 10-year yield fell 4.4bps to 2.7028%
- Australia 3-year bond yield rose 12 bps to 2.76%
- Australia 10-year bond yield rose 9.8 bps to 3.07%
- Gold spot up 0.3% to $1,765.46
- Brent futures down 3.4% to $97.14/bbl
Economic Events
- 10:30: (AU) Australia to Sell A$1 Billion 98-Day Bills
- 10:30: (AU) Australia to Sell A$1 Billion 133-Day Bills
- 11:30: (AU) June International Trade Balance, est. A$14b, prior A$16b
- 11:30: (AU) June Exports MoM, est. 0%, prior 9%
- 11:30: (AU) June Imports MoM, est. 3%, prior 6%
US stocks snapped a two-day decline on Wednesday as corporate earnings and economic data came in better than expected. Treasuries trimmed losses as traders priced in further interest-rate hikes from the Federal Reserve.
The Treasury 10-year yield pushed past 2.80% before falling to 2.70% later in day as investors recalibrated expectations for the Fed’s rate-hike path. Recent data also eased concerns of a broader economic slowdown as growth in the US services sector unexpectedly strengthened to a three-month high in July.
Treasuries had rallied last week after Chair Jerome Powell signaled that the pace of future rate increases may slow later this year, boosting the odds for cuts next year in market-implied measures. But several Fed leaders have since said the central bank is far from done with tightening and remains laser-focused on tamping down price gains that are the hottest in four decades.
Markets are also somewhat calmer as US-China tensions simmered after House Speaker Nancy Pelosi left Taiwan. Her visit had provoked an angry response from China, and markets were on the edge ahead of her arrival on Tuesday.
Oil fell after a brief rally as traders mulled the lack of relief for oil markets and a poor demand outlook.
Other News
Consumer spending, demand uncertainty for miners and labor challenges are front and center as Australia’s earnings season ramps up this month.
Investors will be looking to see how Australia’s biggest companies are weathering trying global macro conditions after the country’s benchmark S&P/ASX 200 Index fell 6.3% this year, outperforming the regional stock gauge by more than 10 percentage points. The world’s No. 2 miner, Rio Tinto Group, kicked off the results season last week by reporting a sharp profit decline and halving its dividend payout, signaling earnings pain ahead for one of the nation’s key sectors.
Traders face a mixed reporting season as rising interest rates and inflation pressures threaten to weaken corporate profits despite buoyant domestic economic conditions.
The Reserve Bank of Australia has rapidly tightened policy, having raised interest rates by 175 basis points since May, as it joins central banks around the world in trying to prevent consumer prices from spiraling out of control.
Company earnings may shed light on how rate hikes are impacting shoppers as Australian retail sales show signs of cooling. Any changes in consumer spending after the RBA’s moves will be closely tracked, Morgan Stanley analysts led by Chris Nicol wrote in a note.
The rate increases might aid Australian bank’s net interest margins, the broker added. Whether that benefit can boost lenders’ share prices “will set a broader tone for the market,” according to Morgan Stanley. Commonwealth Bank of Australia, Australia’s largest lender, reports next week.
