Markets Overview
- ASX SPI 200 futures down 0.5% to 9,062.00
- S&P 500 up 0.1% to 6,741.88
- Dow Average up 0.6% to 46,977.51
- Aussie down 0.3% to 0.6491 per US$
- US 10-year yield fell 2.5bps to 3.9551%
- Australia 3-year bond yield fell 2.9 bps to 3.34%
- Australia 10-year bond yield fell 3.5 bps to 4.12%
- Gold spot down 5.8% to $4,105.43
- Brent futures up 0.8% to $61.48/bbl
Economic Events
- 11:00: (AU) Australia to Sell A$900 Million 2.75% 2035 Bonds
Saudi Arabia is ramping up efforts to deepen ties with Australia, with officials from both countries meeting at the Saudi-ANZUK Forum this week to discuss trade, deals and investment. Woodside is scheduled to release quarterly production report.
A rally that put stocks on the brink of all-time highs wavered as calls for a breather surfaced amid signs of buyer exhaustion. Gold and silver saw steep losses as the dollar rose.
Equities struggled to gain traction, with the S&P 500 closing little changed. Despite recent de-risking amid concerns over trade and credit, stock exposure among global macro hedge funds and long-only strategies remain at the highest in over a year, according to Barclays Plc.
“Our near-term technical outlook is for equities to consolidate/pull back over the next few weeks,” said Craig Johnson at Piper Sandler. “We view pullbacks as healthy and necessary.”
While the US government shutdown has caused an economic data vacuum, drawdowns in equities have been short-lived as investors see them as opportunities to add risk to their portfolios.
“The path of least resistance continues to lead to the upside, and dips remain buying opportunities,” said Michael Brown at Pepperstone Group Ltd.
The Dow Jones Industrial Average hit a record amid a bullish outlook from 3M Co. Meantime, Alphabet Inc. sank as OpenAI took on Google with an AI-Powered ChatGPT browser. In late hours, Netflix Inc. said a tax dispute with Brazil cut into earnings. Texas Instruments Inc. gave a tepid forecast.
Treasury 10-year yields fell two basis points to 3.96%. Bitcoin bounced. Gold and silver saw the biggest rout in years as investors locked in profits on concern that the recent historic rally in the precious metals left them overvalued.
A confluence of factors dragged down the precious metals, including positive trade talks between China and the US, a stronger dollar, overstretched technicals, and uncertainty on investor positioning due to the US government shutdown and end of a seasonal buying spree in India.
Gold’s rally in recent months has been nothing short of extraordinary, fueled by falling yields, persistent central bank buying, and expectations of further monetary easing, according to Fawad Razaqzada at City Index and Forex.com.
“Markets rarely move in straight lines,” he said. “But it is far too early to suggest that the broader bull trend has ended. While corrections are natural, it is worth pointing out that many investors missed out on the big rally. Soon, they may step in to buy the dip, which should keep the selloff contained.”
“Markets rarely move in straight lines,” he said. “But it is far too early to suggest that the broader bull trend has ended. While corrections are natural, it is worth pointing out that many investors missed out on the big rally. Soon, they may step in to buy the dip, which should keep the selloff contained.”
Matt Maley at Miller Tabak says he’ll be watching the recent lows for precious metals for signs they will see something more than just a hiccup over the near-term.
“Experience tells us that when you start to see wild swings in an asset after a very large rally it tends to signal that it’s getting ready for material pullback,” Maley said. “It does not necessarily signal the end of the bull market in that asset. However, these kinds of wild moves after very strong rallies can create some fear among investors and traders.”
Gold, the traditional safe haven for equity investors, is the most volatile it’s been against the S&P 500 since the pandemic.
The spread between 30-day gold volatility and the US equity benchmark has surpassed 11 points — the only other time in the past 10 years when the gap was wider than where it is now was in September 2020.
PineBridge Investments has sharply dialed up exposure to gold at the expense of long-dated government bonds, and has also boosted dollar holdings on a view the greenback will benefit from flows to stocks and stablecoins.
“There’s one safety asset left standing and it’s called gold,” PineBridge’s Michael Kelly said, adding that government bonds can no longer be relied on to “zig when stocks and risk assets zag.”
