Markets Overview
- ASX SPI 200 futures up 0.3% to 7,899.00
- Dow Average up 0.2% to 39,872.99
- Aussie little changed at 0.6666 per US$
- US 10-year yield fell 3.2bps to 4.4120%
- Australia 3-year bond yield rose 1.9 bps to 3.89%
- Australia 10-year bond yield rose 1.4 bps to 4.25%
- Gold spot down 0.2% to $2,420.96
- Brent futures down 1.4% to $82.53/bbl
Economic Events
- 10:00: (AU) Bloomberg May Australia Economic Survey
- 11:00: (AU) Australia to Sell A$300 Million 4.75% 2054 Bonds
Asia stocks look set for a muted open after the S&P 500 crept to another record ahead of results from giant chipmaker Nvidia Corp. that traders see as a gauge for the sustainability of the bull market.
Futures for equity benchmarks in Australia and Hong Kong pointed to small gains, with Japan set to open slightly lower, after the MSCI Asia Pacific Index snapped seven days of gains on Tuesday. The S&P 500 saw its 24th record this year and the Nasdaq 100 also posted a high as Nvidia edged up ahead of earnings due later today. US futures were little changed in early Asia trading.
Global bonds rallied on the latest sign that developed nations are finally getting a grip on inflation as Federal Reserve Governor Christopher Waller said the recent report on US price pressures was “a reassuring signal.”
Trading in Asia will likely be quieter with Singapore closed for a holiday. Central banks in South Korea and New Zealand are set to hold rates steady at meetings on Wednesday and Thursday.
Other News
Australia’s central bank resumed a discussion of interest-rate hikes at its May policy meeting before deciding that the case to stand pat was stronger as it aims to avoid “excessive fine tuning.”
Minutes of the Reserve Bank’s May 6-7 gathering showed the board discussed two options when it left the key rate at 4.35%, noting the risks around its economic forecasts were still “balanced” despite stronger-than-expected data in the run-up to the meeting.
The board “seems focused on looking through the ‘short‑term variation in inflation to avoid excessive fine‑tuning’,” said Belinda Allen, an economist at Commonwealth Bank of Australia. “As a result the hurdle to hike again seems high and instead the risks sit to a later start to the easing cycle than our base case” of November.
The minutes reinforced a widely-held view that rates are set to stay higher-for-longer, with Australian government bonds holding declines and sending the policy sensitive three-year yield rising for a third straight day. Swaps traders now see the RBA staying on hold until mid-2025.
The central bank, which upgraded its near-term inflation forecasts, expects consumer prices to return to its 2-3% target in late-2025, from 3.6% in the first three months of this year. The updated outlook used a technical assumption of no change in rates until mid-2025.
“Members agreed that it was important to convey that recent data and other information had signaled that the risks around inflation had risen somewhat,” Tuesday’s release showed. “It was difficult either to rule in or rule out future changes in the cash rate target.”
The minutes showed the rate-setting board had “limited tolerance” for inflation returning to target later than 2026. ANZ Bank’s Adam Boyton said that line implies the board might be prepared to endure above‑target consumer prices for a little longer than previously anticipated.
“We continue to think that the economy is softening enough to deliver in target inflation and hence retain our view that the next move in the cash rate is down,” Boyton said. He expects a modest easing cycle of three cuts, starting in November.
Governor Michele Bullock has previously suggested the RBA won’t need to wait for inflation to be inside the band before cutting. Even so, she has repeatedly pushed back against speculation over near-term easing, reflecting the RBA’s forecasts that inflation will only return to target late next year.
Data recently has indicated that Australia’s economy is broadly slowing with GDP contracting on a per-person basis, while tepid retail sales reflect downbeat household sentiment.
(Bloomberg)
