Markets Overview
- ASX SPI 200 futures up 0.2% to 7,732.00
- Dow Average up 0.7% to 39,025.90
- Aussie down 0.1% to 0.6605 per US$
- US 10-year yield rose 5.6bps to 4.1546%
- Australia 3-year bond yield fell 0.6 bps to 3.58%
- Australia 10-year bond yield fell 0.6 bps to 3.95%
- Gold spot down 1.2% to $2,156.71
- Brent futures little changed at $82.15/bbl
Economic Events
- 09:00: (AU) Feb. CBA Household Spending YoY, prior 3.6%
- 09:00: (AU) Feb. CBA Household Spending MoM, prior 3.1%
Stocks climbed to a fresh record as the latest inflation figures did little to alter bets the Federal Reserve will cut rates this year — even if officials keep a more cautious stance for now.
An equity decline that lasted just a few minutes gave way to a rebound that pushed the S&P 500 up more than 1%. Notwithstanding the fact that the consumer price index continued to show signs of “stickiness,” the overall report came only slightly above economist estimates. While that’s not ideal for a central bank trying to get close to its 2% target, the CPI was not a shocker to Wall Street traders dreading another post-inflation rout.
The S&P 500 closed around 5,175. Tech led gains on Tuesday, with Oracle Corp. soaring 12% amid cloud revenue growth. Nvidia Corp. rallied over 7%. Boeing Co.’s losses in 2024 approached 30%. Treasuries remained lower after a $39 billion sale of 10-year notes and a growing slate of new corporate bonds.
Other News
Elon Musk has shown he isn’t afraid of picking a fight. Australia’s main auto industry lobby group just became his latest target.
An ugly dispute has broken out between Tesla and Australia’s Federal Chamber of Automotive Industries, or FCAI, over local vehicle-emissions laws. It’s a brawl that encapsulates the challenge of decarbonizing a market that remains stubbornly in love with gas-guzzling pickups.
The disagreement stems from the Australian government’s plan to introduce a fuel-efficiency standard next year to stop carmakers dumping their dirtiest and thirstiest models on the market. The idea is to encourage manufacturers to offer more, and cheaper, electric vehicles.
The proposed policy would set an average emissions target for the vehicles that manufacturers produce and sell. Carmakers can offset the carbon dioxide emitted by their dirtier models either by selling low-emission vehicles or by buying credits from manufacturers that beat the cap.
All this would seem reasonable for a country racing to reach carbon neutrality by 2050. Except in Australia, the two best-selling vehicles are Ford’s Ranger and Toyota’s HiLux pickups. Sport utility vehicles and light commercial vehicles accounted for almost 80% of new-vehicle sales last year.
Perhaps inevitably, Australia’s obsession with petrol pickups has led to a tug-of-war between electric-car leaders like Tesla and old-school rivals that still champion the internal combustion engine. Australia and Russia are the only advanced economies that don’t already have efficiency standards for new cars.
The FCAI, whose members include domestic market leader Toyota, says the government’s vehicle efficiency plan is too aggressive — its targets are unachievable and the penalties are excessive. The group says fines will be passed on to car buyers, and that some brands unable to comply with the new rules may leave the Australian market.
Tesla retaliated last week by canceling its FCAI membership, accusing the group of making “demonstrably false” comments about the policy’s impact on prices. Luxury electric-car brand Polestar followed Tesla out the door a day later, claiming FCAI was waging a deliberate campaign to obstruct Australia’s path to emissions reduction.
The stoush in Australia shows there’s reluctance to accelerate the energy transition in markets that rely overwhelmingly on gasoline and diesel cars. Battery-electric vehicles made up just 9.6% of new-vehicle sales in February. Of the 21,327 pickups sold in Australia last month, only one was an EV.
Responding to Tesla and Polestar, FCAI Chief Executive Officer Tony Weber said the group must act in the interests of the Australian automotive industry and of car buyers. Any new vehicle-efficiency standard “needs to reduce emissions while ensuring low- and no-emission vehicles are accessible and affordable to all Australians,” Weber said in a statement.
There are signs traditional carmakers may win some concessions. Australian Climate Change and Energy Minister Chris Bowen says he’s open to feedback on his policy. “If people have sensible suggestions about where the lines are drawn, we’ll consider it in good faith,” Bowen said over the weekend. He dismissed claims that the rules would drive up the cost of a HiLux.
The emissions spat has left Toyota in a tricky position. While the company touts its range of fuel-efficient hybrids, including the popular Corolla, Camry and RAV4 models, the Japanese automaker also wants to protect the position of the Hilux. It sold 61,111 units last year.
Toyota said in a statement it remains a member of the FCAI and endorses the group’s submission to the government. In that submission, the FCAI said the proposed fuel-efficiency standard “will create a destructive cascading effect of vehicle-price increases, decreased model availability in the market, a slowing in new-vehicle sales, disgruntled consumer sentiment, and an aging of the vehicle fleet.” The group urged the government to “reconsider the timing, structure, and trajectory” of its plan.
The stakes are clear: Even without emissions standards in place, Tesla was Australia’s eighth-best selling car brand last year, and the Model Y was the sixth-ranked model by sales. The old guard aren’t going to go down without a fight.
(Bloomberg)
