Markets Overview

  • ASX SPI 200 futures down 1.3% to 8,458.00
  • S&P 500 down 0.7% to 6,593.38
  • Dow Average down 0.3% to 46,019.90
  • Aussie down 0.4% to 0.6455 per US$
  • US 10-year yield fell 3.3bps to 4.1038%
  • Australia 3-year bond yield rose 4.9 bps to 3.76%
  • Australia 10-year bond yield rose 5 bps to 4.47%
  • Gold spot up 0.2% to $4,084.16
  • Brent futures down 0.2% to $63.39/bbl

Economic Events

  • 11:00: (AU) Australia to Sell A$700 Million 1.25% 2032 Bonds

Equities were poised for another weak session after turbulence on Wall Street, where a brief Nvidia Corp.-led relief rally quickly faded and investors retreated from riskier assets such as cryptocurrencies.

US equity-index futures slipped in early Asian trade after the Nasdaq 100 tumbled 2.4% and the S&P 500 fell 1.6% on Thursday, erasing gains of about 2% earlier in the session. The sharp reversal came as lingering concerns over stretched valuations and heavy investment spending curbed a rally fueled by Nvidia’s upbeat earnings forecast, with the AI bellwether’s shares sliding 3.2%. Stocks in Australia fell, while contracts for Japan and Hong Kong also pointed to a weak open.

The Cboe Volatility Index rose as high as 28, above the key 20 level that causes concern for traders, just as Bitcoin sank below $87,000 for the first time since April. As risk sentiment worsened, Treasuries rose across the curve, pushing down the yields on the benchmark 10-year by three basis points to 4.72%.

Growing scrutiny over whether AI investments were generating sufficient revenue and profits to justify the surge in infrastructure spending continued to drive market swings. Adding to the unease was persistent uncertainty over the Federal Reserve’s ability to cut interest rates next month, as recent remarks from policymakers signaled caution about easing policy too soon.

“Is AI going to be as profitable as the market is pricing in? That’s the key question,” said Matt Maley, chief market strategist at Miller Tabak + Co. LLC. Traders are worried about whether AI investments now would be profitable in five years, he added. “As a result, people are saying, ‘I’ve got to take some chips off the table.’”

The S&P 500 benchmark logged its biggest intraday reversal — at 3.6% — since the height of the tariff turmoil in April, according to data compiled by Bloomberg. The gauge has now fallen 5% from its most recent peak.

US equity multiples are still sitting near levels seen in prior periods of exuberance, even after a pullback that’s pushing the S&P 500 toward its worst November since 2008. Questions around whether AI is generating enough revenue or profits to justify the massive spending on infrastructure also weighed on sentiment Thursday.

“We’re at a ‘show me’ point,” said Martin Schulz, Head of International Equities at Federated Hermes. “Despite all the headwinds — tariff uncertainty, regional war, geopolitical tension and economic slowing — global equity markets have had a strong run. Now it is time for the world’s corporations to deliver on earnings.”

Thursday also brought the release of a long-delayed government employment report, which showed that US job growth picked up in September, while the unemployment rate ticked higher.

The data suggested the labor market showed signs of stabilizing before the government shutdown. The figures come a day after minutes from the Fed’s last policy meeting showed a divided committee on whether to cut rates again.

Fed Governor Michael Barr said the US central bank needs to proceed with caution in considering additional rate cuts with inflation still running above the target. Following fresh jobs data, Barr said he sees the labor market “kind of cooling,” with the economy creating jobs near the so-called break-even pace that keeps unemployment steady.

Fed Bank of Cleveland President Beth Hammack said lowering rates to support the labor market could extend the period of above-target inflation and increase financial stability risks. Her Chicago counterpart Austan Goolsbee signaled that he’s still apprehensive about delivering another rate cut at the central bank’s December meeting.

Investors now see around a 40% probability of a rate cut at the December meeting, according to pricing in swaps contracts. Treasury two-year yields slid six basis points to 3.53%. The dollar edged up.

“At first glance, September’s headline payroll gain appears reassuring, but a closer look reveals that job growth remained fragile and narrowly concentrated heading into the longest government shutdown on record,” EY-Parthenon Senior Economist Lydia Boussour said in a note.

In Asia, Japan may be closer to intervening in the currency market than many investors assume.

Prime Minister Sanae Takaichi’s pro-stimulus policies might deter the Bank of Japan from hiking its benchmark rate in the near term at a time when bets on a Fed cut have receded. Takaichi is set to unveil a stimulus package that will include ¥17.7 trillion ($112 billion) of spending, according to documents seen by Bloomberg Thursday.

Meanwhile in commodities, oil fell after Ukrainian President Volodymyr Zelenskiy said he agreed to work on a peace plan drafted by the US and Russia aimed at ending the war in Ukraine. Gold slipped on the uncertainty of Fed interest rate cuts in December.