US equities bounced sharply as new jobs data allayed market concerns that the US employment outlook had collapsed, and the economy was headed for recession.
Initial jobless claims were reported at 233k last week, showing fewer net job losses, calming market anxiety over last week’s fears of a recession.
The S&P 500 recorded its strongest session since November 2022, rising 2.3%.
US treasuries sold off across the curve as traders trimmed aggressive rate cut expectations with the 2-year treasury yield rising 7 basis points to 4.04%.
US rate markets are still fully pricing a 25-basis point Fed rate cut in September, but the chances of a 50-basis point move have been trimmed to 50%.
In Australia, interest rate futures are still pricing in around a 97% chance of the RBA cutting rates this year, despite explicit guidance from Governor Bullock watering down rate cuts.
RBA Governor, Michele Bullock, reiterated recent comments that the Board’s attentiveness to the upside risks to inflation remained forefront as well as the message that they “will not hesitate” to hike rates should they get a whiff that these upside risks are being realised.
The AUD/USD jumped from a low of 0.6508 to a one-week high of 0.6593 based on these RBA comments and an improvement in risk sentiment coming out of the US.
Oil futures rose 1.1% to US$76.06 per barrel, while gold also popped 1.8% higher to US$2,425.18 per ounce.
