Morning Report
Today's economic developments and market movements.
Click here for the full Morning Report (PDF 198KB)
Key themes: US equities faded late in the session to finish broadly unchanged. A rebound in tech stocks was offset by losses elsewhere as investors pared back rate cut expectations. European shares were higher as the ECB cut its policy rate for the third time this year.
US bond yields increased amid stronger than expected retail trade and labour market data. Investors are now expecting 42bps of cuts this year – down from 54bps a week ago. This supported the US dollar index. This Aussie was higher against the Greenback given yesterday’s stronger the expected jobs report.
Oil stabilised while iron ore and met coal fell over growing concerns China’s stimulus measures will be unable to boost construction activity.
Share markets: US equities faded late in the session to finish broadly unchanged. Tech shares advanced after US listed Taiwan Semiconductor Manufacturing jumped 9.8% after raising its revenue outlook.
This was offset by losses in interest rate sensitive sectors such as real estate (-0.7).
The S&P 500 and the NASDAQ were broadly unchanged. The Dow Jones closed 0.4% higher, led by financial and insurance shares such as Travelers Co. which jumped 9% amid stronger than expected earnings.
In afterhours trading, Netflix advanced following its earnings report which exceeded expectations.
European stocks were also higher as the ECB cut its policy rate for the third time this year. The Euro Stoxx 50 and the DAX both closed 0.8% higher. The FTSE 100 gained 0.7%.
In Asia, the announced Chinese support for housing construction underwhelmed, leading to fall in property shares. The CSI 300 closed 1.1% lower, while the Hang Seng was 1.0% lower.
The ASX200 index rose 0.9%. Nine of eleven sectors finished in the green, led by financials stocks. Futures are pointing to a soft open this morning.
Interest rates: US bond yields increased amid stronger than expected retail trade and labour market data. The US 2-year bond yield increased 4 basis points to 3.98%, while the 10-year bond yield increased 9 basis points to 4.10%.
Markets are much less certain about the prospect of ongoing Fed rate cuts. Interest-rate markets are pricing in around 42bps of cuts by the US Fed over the remainder of 2024 and 148 basis points by the end of 2025.
Bond yields were also higher across Europe. The 10-year Gilt increased 3 basis points to 4.09%, with the 2-year Glit increased one basis point to 4.03%. The German 10-year Bund yield rose 3 basis points to 2.21% and the 2-year yield was down 3 basis points to 2.145%.
Australian yields were also higher overnight. Following yesterday’s stronger than expected jobs report, markets are pricing around 8 basis points of cuts by the end of 2024. The first full rate cut is now expected by May 2025, with around 75 basis points of cuts expected over 2025.
Foreign exchange: The US dollar index firmed (+0.3%), reaching a high of 103.874 before settling at around 103.80. Yield support as investors pared back rate cut expectations is providing the Greenback with a near term boost.
The Aussie was higher (+0.4%) against the Greenback, reaching a high of 0.6697. The pair was supported by the stronger than expected jobs report. The near-term backdrop remains challenging for the AUD/USD pair: soft data out of China, easing commodity prices and ongoing geopolitical tensions pose downside risks.
The euro was softer (-0.3%), falling below 1.082 before stabilising. Yield support is weighing on the euro, with the market fully pricing in another ECB cut before the end of the year. Further, lower growth projections and rating agency concerns are significant headwinds for the euro.
The Japanese Yen continued its slide, with the USD/JPY trading below the key level of 150 per US dollar for the first time since August’s massive shake-up in global markets.
Commodities: Oil was higher despite US production reaching a fresh record high. The EIA reported that inventory levels fell. The West Texas Intermediate (WTI) futures increased 0.5% to US$70.71 per barrel.
Industrial metals from copper to iron ore slumped over growing concerns China’s stimulus measures will be unable to boost construction activity.
Iron ore futures fell by around 5% to trade at $100.80 a tonne in Singapore. Coking coal also declined by 4.6% to US$206 a tonne.
Australia: The labour force survey showed that the labour market remains resilient, with employment growth more than accommodating the strong growth in the working age population and the increase participation.
Employment increased by +64.1k in September, well above the consensus forecast for a +25k lift. After having slowed gradually over the past two years, employment growth looks to have stabilised at a robust level. On a three-month average basis, employment is tracking 2.9%yr, a similar pace to what was seen at the turn of the year.
The participation rate rose from 67.1% in August to 67.2% September, marking the third month in a row where participation has reached a new peacetime record high.
The unemployment rate was 4.1% in September, holding steady from a downwardly revised figure for August (from 4.2% to 4.1%). At two decimal places, the unemployment rate fell 0.07ppt from 4.14% to 4.07%.
Total hours worked increased 0.8%qtr in September. This was driven by a 2.3%qtr increase in the non-market sector, with growth in the market sector coming in at a soft 0.2%qtr.
Eurozone: The ECB cut interest rates for the third time this year, lowering key policy benchmarks by 25bps, in line with market expectations. The policy statement confirmed that the ECB’s assessment was that the “disinflationary process is on track” and added that the “inflation outlook is also affected by recent downside surprises in indicators of economic activity”. Their forward guidance remained unchanged confirming that “the Governing Council will continue to follow a data-dependent and meeting-by-meeting approach” when making policy decisions.
While there were no updated economic forecasts released this time, in the press conference President Lagarde acknowledged that ECB’s projections will probably require downward revisions in the next policy meeting in December. She said “we are still looking at that soft landing, Lower confidence could prevent consumption and investment from recovering as fast as expected… What is clear to all is that we still have risks on both sides of our forecast — upside and downside — probably a bit more on one than the other, probably more downside risk than upside risk”.
Given the forward guidance, they should be sufficient to convince policy makers to lower interest rates again before the end of the year, in line with our expectations.
Headline inflation decelerated to 1.7%yr in September, from the 2.2%yr recorded in August. This was marginally below the consensus and first estimate of a 1.8%yr increase. Core inflation dipped to 2.7%yr in September, from the 2.8%yr recorded in August.
The trade balance deteriorated in August, with trade surplus falling to €11bn. Exports were little changed in the month, down just 0.1%mth, continuing to follow a very flat trend, as external demand remains subdued. Meanwhile, imports were up 1.0%mth following a 1.6%mth rise in July. Imports growth on the annual basis turned positive for the first time since early 2023.
United States: Retail sales came in above market expectations, suggesting the consumer is more resilient than previously expected. indicating a resilient consumer. Headline retail sales were up by 0.4%mth, but well above the average pace in 2024 so far of 0.2%mth. Lower petrol prices dragged the spending (value) in petrol stations lower. Excluding auto and gas, retail sales were up 0.7%mth, a reading at the top of the recent range. Control group sales, a guide of the overall consumer spending, was also up by 0.7%mth, to leave the three-month growth in this category at 1.6%, double the pace seen in Q2 and the highest since Q1 2023.
Jobless claims fell more than expected, to 241k in the week ending 12 October, from 258k in the previous week. This was better than the 259k expected by the market. Continuing claims ticked higher in line with expectations. Some of the recent volatility in this series is likely to be related to the hurricane in the US.
Industrial production fell by 0.3%mth in September, reversing the equivalent increase (which was revised down) in the prior month. Output decreased in manufacturing (-0.4%) and mining (-0.6%) sectors, and only utilities showed an increase in the month (0.8%). While growth in industrial production has been subdued for a while, with output moving broadly sideways since early 2022, the weakness in September was likely driven by special factors – the effects of strikes and the hurricanes.
The Philadelphia Fed’s business-outlook survey was stronger than expected, pointing to expansion in October. Most indicators of activity improved, including orders and shipments. The index rose to 10.3 index points in October from 1.7 points in the previous month. The NAHB homebuilder confidence rose to 43 index points in October, from 41 points in the previous month. This was slightly better than the 42 points expected by the markets.
China: At a policy briefing, the housing minister announced that China will expand a program to support the completion of unfinished housing projects to 4 trillion yuan ($562 billion). This nearly doubles the scale of spending, but fell short of market expectations, causing property shares to retreat and commodity prices to fall.
Stay informed with Westpac IQ
Get the latest reports straight to your inbox.
Related articles
Morning Report
Morning Report
Morning Report
Browse topics
Disclaimer
©2025 Westpac Banking Corporation ABN 33 007 457 141 (including where acting under any of its Westpac, St George, Bank of Melbourne or BankSA brands, collectively, “Westpac”). References to the “Westpac Group” are to Westpac and its subsidiaries and includes the directors, employees and representatives of Westpac and its subsidiaries.
Things you should know
We respect your privacy: You can view our privacy statement at Westpac.com.au. Each time someone visits our site, data is captured so that we can accurately evaluate the quality of our content and make improvements for you. We may at times use technology to capture data about you to help us to better understand you and your needs, including potentially for the purposes of assessing your individual reading habits and interests to allow us to provide suggestions regarding other reading material which may be suitable for you.
This information, unless specifically indicated otherwise, is under copyright of the Westpac Group. None of the material, nor its contents, nor any copy of it, may be altered in any way, transmitted to, copied of distributed to any other party without the prior written permission of the Westpac Group.
Disclaimer
This information has been prepared by the Westpac and is intended for information purposes only. It is not intended to reflect any recommendation or financial advice and investment decisions should not be based on it. This information does not constitute an offer, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter into a legally binding contract. To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice. Certain types of transactions, including those involving futures, options and high yield securities give rise to substantial risk and are not suitable for all investors. We recommend that you seek your own independent legal or financial advice before proceeding with any investment decision. This information may contain material provided by third parties. While such material is published with the necessary permission none of Westpac or its related entities accepts any responsibility for the accuracy or completeness of any such material. Although we have made every effort to ensure this information is free from error, none of Westpac or its related entities warrants the accuracy, adequacy or completeness of this information, or otherwise endorses it in any way. Except where contrary to law, Westpac Group intend by this notice to exclude liability for this information. This information is subject to change without notice and none of Westpac or its related entities is under any obligation to update this information or correct any inaccuracy which may become apparent at a later date. This information may contain or incorporate by reference forward-looking statements. The words “believe”, “anticipate”, “expect”, “intend”, “plan”, “predict”, “continue”, “assume”, “positioned”, “may”, “will”, “should”, “shall”, “risk” and other similar expressions that are predictions of or indicate future events and future trends identify forward-looking statements. These forward-looking statements include all matters that are not historical facts. Past performance is not a reliable indicator of future performance, nor are forecasts of future performance. Whilst every effort has been taken to ensure that the assumptions on which any forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from any forecasts.
Conflicts of Interest: In the normal course of offering banking products and services to its clients, the Westpac Group may act in several capacities (including issuer, market maker, underwriter, distributor, swap counterparty and calculation agent) simultaneously with respect to a financial instrument, giving rise to potential conflicts of interest which may impact the performance of a financial instrument. The Westpac Group may at any time transact or hold a position (including hedging and trading positions) for its own account or the account of a client in any financial instrument which may impact the performance of that financial instrument.
Author(s) disclaimer and declaration: The author(s) confirms that (a) no part of his/her compensation was, is, or will be, directly or indirectly, related to any views or (if applicable) recommendations expressed in this material; (b) this material accurately reflects his/her personal views about the financial products, companies or issuers (if applicable) and is based on sources reasonably believed to be reliable and accurate; (c) to the best of the author’s knowledge, they are not in receipt of inside information and this material does not contain inside information; and (d) no other part of the Westpac Group has made any attempt to influence this material.
Further important information regarding sustainability-related content: This material may contain statements relating to environmental, social and governance (ESG) topics. These are subject to known and unknown risks, and there are significant uncertainties, limitations, risks and assumptions in the metrics, modelling, data, scenarios, reporting and analysis on which the statements rely. In particular, these areas are rapidly evolving and maturing, and there are variations in approaches and common standards and practice, as well as uncertainty around future related policy and legislation. Some material may include information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. There is a risk that the analysis, estimates, judgements, assumptions, views, models, scenarios or projections used may turn out to be incorrect. These risks may cause actual outcomes to differ materially from those expressed or implied. The ESG-related statements in this material do not constitute advice, nor are they guarantees or predictions of future performance, and Westpac gives no representation, warranty or assurance (including as to the quality, accuracy or completeness of the statements). You should seek your own independent advice.
Additional country disclosures:
Australia: Westpac holds an Australian Financial Services Licence (No. 233714). You can access Westpac’s Financial Services Guide here or request a copy from your Westpac point of contact. To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice.
New Zealand: In New Zealand, Westpac Institutional Bank refers to the brand under which products and services are provided by either Westpac (NZ division) or Westpac New Zealand Limited (company number 1763882), the New Zealand incorporated subsidiary of Westpac ("WNZL"). Any product or service made available by WNZL does not represent an offer from Westpac or any of its subsidiaries (other than WNZL). Neither Westpac nor its other subsidiaries guarantee or otherwise support the performance of WNZL in respect of any such product. WNZL is not an authorised deposit-taking institution for the purposes of Australian prudential standards. The current disclosure statements for the New Zealand branch of Westpac and WNZL can be obtained at the internet address www.westpac.co.nz .
Singapore: This material has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (as defined in the applicable Singapore laws and regulations) only. Recipients of this material in Singapore should contact Westpac Singapore Branch in respect of any matters arising from, or in connection with, this material. Westpac Singapore Branch holds a wholesale banking licence and is subject to supervision by the Monetary Authority of Singapore.
U.S.: Westpac operates in the United States of America as a federally licensed branch, regulated by the Office of the Comptroller of the Currency. Westpac is also registered with the US Commodity Futures Trading Commission (“CFTC”) as a Swap Dealer, but is neither registered as, or affiliated with, a Futures Commission Merchant registered with the US CFTC. The services and products referenced above are not insured by the Federal Deposit Insurance Corporation (“FDIC”). Westpac Capital Markets, LLC (‘WCM’), a wholly-owned subsidiary of Westpac, is a broker-dealer registered under the U.S. Securities Exchange Act of 1934 (‘the Exchange Act’) and member of the Financial Industry Regulatory Authority (‘FINRA’). In accordance with APRA's Prudential Standard 222 'Association with Related Entities', Westpac does not stand behind WCM other than as provided for in certain legal agreements between Westpac and WCM andobligations of WCM do not represent liabilities of Westpac. This communication is provided for distribution to U.S. institutional investors in reliance on the exemption from registration provided by Rule 15a-6 under the Exchange Act and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors in the United States. WCM is the U.S. distributor of this communication and accepts responsibility for the contents of this communication. Transactions by U.S. customers of any securities referenced herein should be effected through WCM. All disclaimers set out with respect to Westpac apply equally to WCM. If you would like to speak to someone regarding any security mentioned herein, please contact WCM on +1 212 389 1269. Investing in any non-U.S. securities or related financial instruments mentioned in this communication may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the SEC in the United States. Information on such non-U.S. securities or related financial instruments may be limited. Non-U.S. companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in effect in the United States. The value of any investment or income from any securities or related derivative instruments denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or related derivative instruments.
The author of this communication is employed by Westpac and is not registered or qualified as a research analyst, representative, or associated person of WCM or any other U.S. broker-dealer under the rules of FINRA, any other U.S. self-regulatory organisation, or the laws, rules or regulations of any State. Unless otherwise specifically stated, the views expressed herein are solely those of the author and may differ from the information, views or analysis expressed by Westpac and/or its affiliates.
UK and EU: The London branch of Westpac is authorised in the United Kingdom by the Prudential Regulation Authority (PRA) and is subject to regulation by the Financial Conduct Authority (FCA) and limited regulation by the PRA (Financial Services Register number: 124586). The London branch of Westpac is registered at Companies House as a branch established in the United Kingdom (Branch No. BR000106). Details about the extent of the regulation of Westpac’s London branch by the PRA are available from us on request.
Westpac Europe GmbH (“WEG”) is authorised in Germany by the Federal Financial Supervision Authority (‘BaFin’) and subject to its regulation. WEG’s supervisory authorities are BaFin and the German Federal Bank (‘Deutsche Bundesbank’). WEG is registered with the commercial register (‘Handelsregister’) of the local court of Frankfurt am Main under registration number HRB 118483. In accordance with APRA’s Prudential Standard 222 ‘Association with Related Entities’, Westpac does not stand behind WEG other than as provided for in certain legal agreements (a risk transfer, sub-participation and collateral agreement) between Westpac and WEG and obligations of WEG do not represent liabilities of Westpac.
This communication is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. This communication is not being made to or distributed to, and must not be passed on to, the general public in the United Kingdom. Rather, this communication is being made only to and is directed at (a) those persons falling within the definition of Investment Professionals (set out in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”)); (b) those persons falling within the definition of high net worth companies, unincorporated associations etc. (set out in Article 49(2)of the Order; (c) other persons to whom it may lawfully be communicated in accordance with the Order or (d) any persons to whom it may otherwise lawfully be made (all such persons together being referred to as “relevant persons”). Any person who is not a relevant person should not act or rely on this communication or any of its contents. In the same way, the information contained in this communication is intended for “eligible counterparties” and “professional clients” as defined by the rules of the Financial Conduct Authority and is not intended for “retail clients”. Westpac expressly prohibits you from passing on the information in this communication to any third party.
This communication contains general commentary, research, and market colour. The communication does not constitute investment advice. The material may contain an ‘investment recommendation’ and/or ‘information recommending or suggesting an investment’, both as defined in Regulation (EU) No 596/2014 (including as applicable in the United Kingdom) (“MAR”). In accordance with the relevant provisions of MAR, reasonable care has been taken to ensure that the material has been objectively presented and that interests or conflicts of interest of the sender concerning the financial instruments to which that information relates have been disclosed.
Investment recommendations must be read alongside the specific disclosure which accompanies them and the general disclosure which can be found here. Such disclosure fulfils certain additional information requirements of MAR and associated delegated legislation and by accepting this communication you acknowledge that you are aware of the existence of such additional disclosure and its contents.
To the extent this communication comprises an investment recommendation it is classified as non-independent research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and therefore constitutes a marketing communication. Further, this communication is not subject to any prohibition on dealing ahead of the dissemination of investment research.