Markets Overview
- ASX SPI 200 futures down 0.3% to 8,756.00
- Dow Average down 0.5% to 43,968.64
- Aussie up 0.3% to 0.6524 per US$
- US 10-year yield rose 2.0bps to 4.2461%
- Australia 3-year bond yield fell 1.5 bps to 3.39%
- Australia 10-year bond yield fell 1.3 bps to 4.24%
- Gold spot up 0.8% to $3,396.54
- Brent futures down 0.8% to $66.36/bbl
Economic Events
- 11:00: (AU) Australia to Sell A$1 Billion 3% 2033 Bonds
- 16:30: (AU) July Foreign Reserves, prior A$101.9b
Asian stocks were set for a cautious open Friday after Wall Street halted a rally that drove stocks to the brink of a record amid concerns about an overheated market.
Equity futures in Australia and Hong Kong pointed to losses at the start of trading, while those for Japan indicated gains. Contracts for US stocks edged higher after the benchmark S&P 500 closed little changed following the almost 30% advance from its April lows.
The potentially staid start reflected growing market nerves heading into the weekend. Trade tensions between the US and India are rising, while Trump has signaled new sanctions on Russia could land as early as Friday. Treasury Secretary Scott Bessent also added that China levies “could be on the table” over the buying of Russian oil.
“We’ll see a drift in Asian markets this morning with all eyes still on various geopolitical updates and nothing inspirational on the economic calendar,” said Nick Twidale, chief market analyst at AT Global Markets in Sydney. “I’m expecting relatively quiet markets with a bit of profit taking into the weekend, although these days are the ones that tend to catch traders unaware if something does happen.”
Whether or not the blistering rally in American equities is about to cool, some big firms have warned clients to prepare for a near-term pullback amid sky-high valuations. Added to bulls’ worries is seasonality. August and September have historically been the two worst months for the S&P 500.
“We talk about the potential for ‘air pockets’ in this current environment based primarily on headline risk, which remains elevated in our view,” said Dan Wantrobski at Janney Montgomery Scott. “This renders them vulnerable to pullbacks as we enter the second half of 2025.”
Australian bond futures slipped, tracking Treasuries after Thursday’s $25 billion bond sale followed poor results for three- and 10-year debt auctions this week. Long-end gains faded, leaving 30-year yields about one basis point higher at 4.83%. The yield on 10-year bonds rose two basis points to 4.25%. The dollar edged lower.
On the economic front, US continuing jobless claims surged to the highest since November 2021, adding to recent signs that the labor market is weakening.
Meantime, Federal Reserve Governor Christopher Waller is emerging as a top candidate to serve as the central bank’s chair among President Trump’s advisers as they look for a replacement for Jerome Powell, according to people familiar with the matter.
Trump said he had chosen Council of Economic Advisers Chairman Stephen Miran to serve as a Fed governor. The US president said that Miran, who will need to be confirmed by the Senate, would only serve the expiring term of Adriana Kugler, which expires in January.
“Depending on the president’s perception of his performance, he may also be a contender to replace Chair Powell when his term ends in May,” Joseph Capurso, head of international economics at Commonwealth Bank of Australia wrote in a note to clients. “While we expect Miran to advocate for lower interest rates, we do not consider he will push the FOMC to cut the Funds rate if the data does not support a cut.”
Elsewhere, the Bank of England cut rates to the lowest in over two years in a closer-than-expected decision that leaves investors with what Governor Andrew Bailey called “genuine uncertainty” on its next move. The pound climbed.
