Markets Overview
- ASX SPI 200 futures down 0.7% to 8,804.00
- S&P 500 little changed at 6,584.29
- Dow Average down 0.6% to 45,834.22
- Aussie down 0.2% to 0.6645 per US$
- US 10-year yield rose 4.5bps to 4.0643%
- Australia 3-year bond yield rose 1.6 bps to 3.43%
- Australia 10-year bond yield fell 1.8 bps to 4.22%
- Gold spot up 0.2% to $3,643.14
- Brent futures up 0.9% to $66.99/bbl
Economic Events
Australia will spend A$12 billion on a defense hub to build naval ships and dock nuclear submarines, as Canberra seeks to bolster US backing for the Aukus pact.
The dollar was steady in early Asian trading as US-China trade talks entered a second day, with investors focused on this week’s Federal Reserve policy decision.
The greenback was mixed against major currencies and US equity futures were little changed after the benchmark S&P 500 closed flat on Friday. Asian contracts signaled declines, while Japan’s markets are closed for a holiday. Oil edged lower after President Donald Trump urged Group of Seven allies to impose tariffs on India and China for buying Russian crude.
The US-China talks are focused on trade, the economy and the status of ByteDance Ltd.’s TikTok, which faces a deadline this week to reach a deal to continue operations in the US. Officials were also expected to lay the groundwork for a potential meeting between Donald Trump and Xi Jinping as soon as October.
Traders on Monday will be closely parsing a slew of Chinese data to help gauge the health of the world’s second largest economy. Retail sales growth may have quickened from a year ago while industrial output may have slowed, according to Bloomberg surveys.
“We expect another soft set of numbers from today’s Chinese August ‘data dump’ which can provide some temporary support for dollar-yuan,” Commonwealth Bank of Australia strategists led by Joseph Capurso wrote in a note to clients.
Still, the Fed’s policy meeting this week will remain a key focus as markets question whether officials push back against bets of easing at each remaining meeting this year. A quarter-point reduction is seen as a sure thing when the Fed announces its policy decision Wednesday, with a small potential for a half-point move amid signs US job growth is slowing rapidly.
The Fed is likely to deliver a dovish cut with at least one member in favor of a 50 basis point reduction, and new forecasts that imply a steeper easing path to guard against a weakening labor market, said Elias Haddad, a senior market strategist at Brown Brothers Harriman. “A dovish Fed policy stance can drag US dollar lower and support risk assets.”
Elsewhere, Fitch Ratings downgraded France to A+ from AA- late Friday. The score is now a notch lower than the UK and on par with Belgium, indicating the upheaval of repeated government collapse has locked the country into an enduring battle to contain a swelling debt burden.
France’s 10-year benchmark bonds offer one of the highest yields in the euro area, akin to Lithuania, Slovakia and Italy. The premium they pay over German peers has nearly doubled since Macron called elections last year, a sign of weaker investor demand.
