Markets Daily
Short- term bond yields fell following Fed chair Powell’s speech, while long- term bond yields rose. The US dollar was mixed to a touch softer, AUD edging back up to 0.6330. Today’s calendar includes Japan September CPI and UK September retail sales.
Yesterday
Growth in Australia employment rose just 6.7k in September, compared to Westpac’s forecast, and the market consensus, for a 20k gain. Abstracting from month-to-month volatility, the pace of employment gains has gradually moderated over the course of this year, from a three-month average pace of +48k/mth in March, to +30k/mth in June, now to +23k/mth in September. It is also important to mention the emerging softness in hours worked. Following a –0.5% decline in August, seasonally adjusted hours worked fell once again in September, by –0.4%. Despite the soft jobs reading, the unemployment rate dipped 0.1ppt to 3.6% as the participation rate fell from 67.0% to 66.7%. AUD/USD fell from 0.6335 to 0.6315, later extending to just below 0.6300 amid a poor regional risk mood. The ASX 200 closed -1.4%, with Hong Kong and China nearer -2%, Japan’s Topix -1.2%.
Currencies/Macro
The US dollar was whippy during Powell’s speech, steadying little changed against most majors but a bit softer against the Swiss franc and euro. EUR/USD rose from 1.0540 to 1.0580 with a spike to 1.0616 on the initial Powell headlines. GBP/USD is net unchanged at 1.2140, with a high of 1.2192. USD/JPY ranged sideways between 149.67 and 149.96. AUD/USD traded around its Sydney session lows below 0.6300, but starts Friday trade around 0.6330, with a high of 0.6357 during Powell’s presentation. NZD/USD rose from 0.5816 (lowest since November) to 0.5850. AUD/NZD returned to 1.0825.
Fed chair Powell delivered mixed commentary on interest rates. He indicated that the FOMC could be sidelined by the rise in longer term interest rates (probably due to increased term premiums) that are doing some of the Fed's heavy lifting. However, he also thought that the economy's resilience could be due to the fact that rates have not been high enough for long enough, suggesting a restrictive stance is needed for much longer.
US weekly initial jobless claims of 198k (est. 210k) and continuing claims of 1.734m (est. 1.710m) continued the firm run of data over recent months. Existing home sales in September continued to slide, falling -2.0% (est. -3.7%). The NAR cited low inventories as a key driver of falling sales ,but also mentioned higher rates.
The October Philadelphia Fed business survey was close to expectations at -9.0 (est. -7.0, prior -13.5), with slightly lower prices, higher new orders and employment, and lower workweek and 6-month outlook levels.
Interest rates
US 2yr treasury yields fell from 5.26% (highest since 2006) to 5.16%, while 10yr yields rose from 4.91% to 4.99% (highest since 2007) via 4.89% during the Powell speech. Markets are pricing the Fed funds rate, currently 5.375% (mid), to be 2bp higher at the next meeting on 1 November, with a 45% chance of a hike in February.
Australian 3yr government bond yields (futures) roundtripped from 4.25% to 4.28% and back, while the 10yr yield roundtripped from 4.81% to 4.74% and back. Markets are pricing the RBA cash rate, currently at 4.10%, to be 9bp higher on 7 November, with a 100% chance of a hike by March. New Zealand rates markets price the OCR, currently at 5.50%, to be 3bp higher on 29 November, with a 50% chance of a hike by April 2024.
Credit spreads highlighted the shift in sentiment in the US session with Main a bp wider to 87, however CDX has seen a significant move post the Powell speech to now be over 3bp higher at 81.5, the widest print for the new series, with US cash also 2-4bp wider.
Commodities
Crude markets rose again as wires reported that a US destroyer had shot down cruise missiles and drones from Yemen, probably aimed for Israel. November WTI is last up $2.15 (2.43%) at $90.47 while the December Brent contract is up $1.67 (1.83%) at $93.17. Analysts also questioned how much of an impact an easing on Venezuelan sanctions could have given that current production sits at circa 750/800kbpd. Some analysts believe an increase in the region of 200 to 250kbpd can be seen as soon as next year though much will depend on how quickly and to what extent sanctions are lifted. Reuters reported OPEC+ sources as stating that an easing in US sanctions on Venezuela is “unlikely to require any policy changes by the group for the time being”. Russian deputy PM Novak said the country has no plans to ease diesel export rules though “if there are any problems, they will be considered by the Energy Minister”.
US natural gas prices slid to two-week lows after EIA storage data showed a larger than expected inventory build. European prices also softened as deliveries into northwest Europe hit highs back to June.
Metals were modestly higher with copper up 0.5% at $8,010 and aluminium up 0.4% at $2,190. However, nickel fell 0.7% to $18,530. Freeport President Kathleen Quirk told analysts on an earnings call that “we all see this looming deficit coming, but current [copper] prices don’t support big investments at the current time”. Australian miner Liontown reported it has lined up A$1.1bn through an equity raising and debt financing to fund its Kathleen Valley lithium project after US giant Albemarle confirmed earlier in the week it was walking away from a proposed takeover.
Iron ore prices marked time despite another slide in Chinese construction stocks to decade-plus lows. The November SGX contract is down 15c from the same time yesterday while the 62% Mysteel index rose 65c at $119.85. The Hang Seng Mainland Property index fell over 3% on its lows yesterday while the Property and Construction index is down 4% on the week to fresh lows back to 2009. Caixin reported that no payment had been made by Country Garden on a $15.4mn coupon at the end of the October 17/18 grace period according to two sources. Wires reported that the US and EU have been unable to reach agreement on a steel and aluminium accord ahead of a summit in Washington Friday. The hope had been that Katherine Tai and Vladis Dombrovskis would be able to reach an agreement which could have been announced in Washington on Friday. Negotiations on the Global Arrangement on Sustainable Steel and Aluminium will continue through to year end, and if no agreement is forthcoming, Trump tariffs will return.
Day ahead
Japan: The September CPI should follow suit from the Tokyo CPI last week, highlighting a further deceleration in inflation pressures. Consensus is 3.0%yr overall, 2.7%yr on CPI ex-fresh food (the BoJ target measure) and 4.1% ex-fresh food and energy.
UK: The recovery in GfK consumer sentiment is being buoyed by solid wages growth (market f/c: –20), however the pass-through to retail sales growth remains limited at this stage (market f/c: –0.4%mth, -0.2%yr for September sales volumes).
US: The FOMC’s Logan, Harker and Mester are all due to speak at different events. The FOMC then enters the media blackout period ahead of the 1 November meeting.
Stay informed with Westpac IQ
Get the latest reports straight to your inbox.
Related articles
Aussie bulls press the advantage
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.