Markets Overview
- ASX SPI 200 futures up 0.5% to 8,640.00
- S&P 500 up 0.9% to 6,834.50
- Dow Average up 0.4% to 48,134.89
- Aussie little changed at 0.6615 per US$
- US 10-year yield rose 2.5bps to 4.1471%
- Australia 3-year bond yield rose 2.5 bps to 4.12%
- Australia 10-year bond yield rose 0.6 bps to 4.75%
- Gold spot up 0.1% to $4,338.88
- Brent futures up 1.1% to $60.47/bbl
Economic Events
Asian equity markets are poised for a positive open, tracking gains in US stocks on Friday as traders gear up for the holiday period.
Equity futures point to Australian, Hong Kong and Japanese stock benchmarks opening higher on Monday, though moves may be exacerbated by thinned trading. The dollar was little changed against major peers in early Asia hours.
Hopes are brewing for a typical year-end “Santa Claus rally” as dip buyers reemerged last week following a slide driven by doubts over AI exuberance and the scope for Federal Reserve easing. US stocks jumped 0.9% Friday, wiping out the week’s loss as volumes spiked during a quarterly options and futures expiry and as traders positioned for a rally into 2026.
“We’re now likely to see markets continue higher, starting with Asia,” said Tony Sycamore, an analyst at IG in Sydney. “The one big elephant in the room remains the valuations in AI and where we go from here.”
Australian bonds tracked Treasuries lower in early trading. US yields edged higher Friday as New York Fed President John Williams signaled no urgency to cut interest rates again given recent employment and inflation data. Cleveland Fed President Beth Hammack echoed that sentiment in an interview with the Wall Street Journal, reinforcing expectations for a pause after a string of recent reductions.
While the slew of economic data last week did little to provide clarity on the outlook for US interest rates, traders continued to bet on two rate cuts in 2026.
“We think inflation worries voiced by some hawks on the board are overdone and overall risks in the labor market are clearly to the downside,” Citigroup Inc. strategists including Adam Pickett wrote in a note to clients. But with only one clean set of data to be published prior to next month’s meeting, “this makes current market pricing of 30% probability of cut in January look fair,” they wrote.
Traders in Asia will soon shift focus to China’s one and five-year loan prime rates later Monday. Commercial banks are likely to keep lending rates unchanged for a seventh month as expectations grow that the People’s Bank of China could ease policy next year.
“A weaker economy heading into the fourth quarter has raised the urgency for more support to prevent a sharper slowdown, with year-end policy meetings hinting slightly more monetary easing in 2026,” said Eric Zhu from Bloomberg Economics. “We see the next rate cut early next year, guiding lending rates lower.”
Elsewhere, UK and US growth readings are due this week, as well as minutes from the Reserve Bank of Australia’s December policy meeting which may give clues to whether it could hike in February. In Japan, Tokyo inflation as well as national jobs data are due, helping traders assess the outlook for Bank of Japan policy after its cautious hike last week.
In commodities, oil settled just above $56 per barrel on Friday as concerns over a growing supply glut outweighed geopolitical risks to supply. The Trump administration boarded the Centuries supertanker early Saturday and remains in pursuit of a third as its oil blockade of Venezuela continues.
