The ASX recorded its strongest two-day rally since early 2020 on hopes that global central banks will replicate the RBA’s dovish concession.
Australian shares had their best two-day rally since the start of the pandemic as investors seized on evidence of weaker US economic data as grounds for optimism that central banks will slow the pace of policy tightening and avert recession.
This was “the first meaningful sign of some cracks in the labour market”, said Ray Attrill, head of FX strategy at National Australia Bank. “The Fed will undoubtedly welcome the tentative signs of easing demand for labour.”which was also softer than expected, kicking off a rally in bond prices and decline in bond yields.The US 10-year Treasury rate slumped to 3.61 per cent from almost 4 per cent last week. In a classic indicator of looming recession, the shorter-dated US two-year rate is at 4.
“I think the Fed is probably getting closer to that, and I think we’ll start to see other central banks start to pivot soon too.” NZ’s benchmark rate has now risen by 3.25 percentage points since the central bank started its tightening cycle in October last year. Wednesday’s move was the fifth consecutive 0.5 percentage point lift. Futures markets think the RBNZ will get to 4.5 per cent before it stops tightening.
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