Global equity markets rebounded overnight, helped by some constructive comments from Fed officials and investors looking for value trades.
The S&P 500 and the Nasdaq both closed 1.0% higher while in Asia, the Nikkei bounced 10.2% following the fall of 12.4% recorded in the previous session.
The US 2-year bond yield increased 5 basis points to 3.98%, while the 10-year treasury yield increased 10 basis points to 3.89%. US interest-rate markets are now pricing in around 100 basis points of cuts by the US Fed this year.
Locally the focus was on the RBA meeting. The Reserve Bank Board left the cash rate unchanged at 4.35% in August, consistent with the market’s expectation.
The RBA Governor making it clear that ‘a near-term reduction in the cash rate doesn’t align with the Board’s current thinking.’
The Board’s policy statement continued to highlight upside risks to inflation and were more hawkish than markets expected. In the media conference after the decision, the Governor went even further by stating explicitly that: ‘A near-term reduction in the cash rate doesn’t align with the Board’s current thinking’, all but ruling out rate cuts this year.
Following on from this, markets are now only pricing 20 basis points of cuts this year, with the first full rate cut priced in by February 2025.
The AUD/USD was largely unchanged, remaining above 65 cents.
Gold, copper and gold were lower.
