ASX to rise; Nvidia, Meta help pace US tech rebound

The yield on the US 10-year note was 3 basis points lower to 4.57 per cent at 4.59pm in New York. German bond yields rose to a fresh 12-year high, and the risk-premium over Italian debt hit a six-month-high, after the government cut its growth forecasts for this year and next and increased its budget deficit targets.

As for where rates are headed, in a note Goldman Sachs said: “The longer the [US] economy remains resilient to higher rates, the more that the risks to forward rates are likely modestly to the upside as neutral rate views remain under pressure.

“If the economy enters recession, the market would likely take that as confirmation of the belief that policy rates at these levels are highly restrictive. This scenario would likely lead to a fall in long-term rates from current levels and may now be what is necessary to see a reset back into lower regimes from here.”

On Wall Street, shares closed higher, though off their session peaks, and volatility eased. The volatility index was 4 per cent lower. The NYSE Fang + Index was 1.2 per cent higher.

In a note, ANZ Research said while there was no clear reason for the slide in oil prices, there’s speculation that Saudi Arabia might increase supply sooner than previously expected and continued supply of Ural grade oil from Russia as G7 sanctions remain ineffective.

“Markets remain nervous that high oil prices might keep interest rates higher for longer, as central banks fight high inflation expectations. Hence, markets view any fall in oil prices optimistically.”

Oanda’s Edward Moya said Wall Street is struggling for reasons to buy into the recent weakness.

Mr Moya on what’s happening with oil: “After coming a few dollars short of the $US100 level, energy traders are quickly locking in profits given the turbulence happening in the bond market. Crude demand destruction will clearly happen globally if this bond market sell-off extends. Unless a major de-risking moment occurs, the oil market will still remain tight throughout the rest of the year.”

Today’s agenda

Local: Private sector credit August at 11.30am

Overseas data: NZ consumer confidence at 7am; Japan August industrial production, unemployment and retail sales; UK final second quarter GDP at 4pm; Eurozone preliminary CPI September at 7pm; ECB president Christine Lagarde speaks; US August personal income, spending and Core PCE at 10.30pm, Chicago PMI September, University of Michigan consumer sentiment, New York Fed president John Williams speaks

*China is expected to release September PMI data as early as today or on the weekend; Chinese markets are closed as of Friday for the Mid-Autumn Festival. The Shanghai Stock Exchange will be closed through October 8.

Other top stories

Minister King blocked talks over Qatar flights Transport Minister Catherine King did not allow her department to open negotiations with Qatar over its request to double flights into Australia before abruptly blocking the bid.

Chanticleer: ‘Rates do matter’: Blunt warning from $11b giant Soul Patts Soul Patts’ big shift into private markets reflects its view that the rise in bond yields rocking global markets will weigh heavily on equity markets.

Australia’s 10 most powerful people in 2023 Government, the ultimate power in this country, is being shaped by very different political forces than those brought to bear at the 2022 election.

The power pivot: Albanese in front, business is back, teals are gone With unions on the march, the Greens on the up and support for the Voice trending down, the federal government has hit rocky terrain.

The AFR View: The challenges chipping away at the PM’s power If the Voice goes down on October 14, Anthony Albanese will have to turn his full attention to grappling with the inflation and cost of living issues.

Market highlights

ASX futures up 45 points or 0.64% to 7097 near 7am AEST

• AUD +1.2% to 64.28 US cents
• Bitcoin +2.8% to $US26,999 at 7.19am AEST
• On Wall St: Dow +0.4% S&P +0.6% Nasdaq +0.8%
• In New York: BHP +2.7% Rio +2.4% Atlassian -0.3%
• Tesla +2.4% Apple +0.2% Nvidia +1.5% Meta +2.1%
• Stoxx 50 +0.7% FTSE +0.1% CAC +0.6% DAX +0.7%
• Spot gold -0.6% to $US1864.78/oz at 2.40pm in New York
• Brent crude -1.3% to $US945.30 a barrel
• Iron ore +1.7% to $US118.55 a tonne
• 10-year yield: US 4.57% Australia 4.45% Germany 2.93%
• US prices as of 4.59pm in New York

United States

Torsten Slok, chief economist at Apollo Global Management: “Looking ahead, the real risk to the economy, including financial stability, is if weak economic data doesn’t result in falling long-term interest rates. The Treasury market’s reaction to the employment report next week will be very important and likely set the tone for markets in Q4.”

The weekly sentiment report from the American Association of Individual Investors found a distinct shift: bearishness surged 6.3 percentage points to 40.9 per cent. Bullishness fell 3.5 percentage points to 27.8 per cent and has fallen by a cumulative 14.4 percentage points over the past three weeks.

US gross domestic product increased at an unrevised 2.1 per cent annualised rate last quarter, the government said in its third estimate of GDP for the April-June period. That was in line with economists’ expectations.

The GDP data showed that personal consumption, the main driver of the US economy, rose an annualised 0.8 per cent in the April-to-June period. That compared with 1.7 per cent in the previous estimate, and marked the weakest advance in over a year.

A report from the Labor Department showed initial claims for state unemployment benefits rose 2000 to a seasonally adjusted 204,000 for the week ended September 23. Economists had forecast 215,000 claims for the latest week.

The United Auto Workers union wants to emerge from its strike against Detroit’s three major automakers with at least a 30 per cent pay raise, Bloomberg report. That’s lower than the around 40 per cent hike it initially proposed to Ford Motor, General Motors and Stellantis.

Uber Technologies, DoorDash and GrubHub lost an attempt to block a New York City rule setting minimum pay of $US18 an hour for food delivery workers, handing the city a victory in its attempts to rein in the now-ubiquitous services.

GameStop appointed billionaire Ryan Cohen as chief executive officer, filling a post that’s been empty since the company fired its previous CEO in June.

A subsidiary of American Lithium is betting it can defy the odds in Peru and open the country’s first lithium mine in speedy fashion despite a sluggish permitting system that can keep projects on hold for years.

That’s according to Ulises Solis, the chief executive officer of Macusani Yellowcake, the local subsidiary that is developing the Falchani lithium project in Peru.

Commodities

The Biden administration is charting plans to sell offshore oil drilling rights in the Gulf of Mexico over the next five years, despite objections from environmentalists who argue the move would be disastrous for the climate, according to Bloomberg.

The Interior Department ruled out adopting an offshore oil leasing plan that completely blocked auctions through late 2028, according to people familiar with the deliberations who declined to be named because the measure is not yet public.

Macron woos Australia on critical minerals Resources Minister Madeleine King has signed a pact with France to look at building secure supply chains from Australia to Europe.

China’s grip on critical minerals draws warnings at IEA gathering US Energy Secretary Jennifer Granholm told a closed-door meeting of government officials in Paris that energy security is poised to become increasingly complex

Recycling is a must for the mining industry, BHP boss says Mike Henry’s comments raise the question of whether BHP might follow Rio Tinto with a bigger investment in the scrap industry.

Aramco stake in MidOcean would extend its reach into Australia The investment is the Saudi company’s first in LNG and would tap into MidOcean’s expansion into Australia, in part through Brookfield’s move on Origin Energy.