AUSTRALIA DATA: Westpac Lead Indicator Signals Around Trend Growth
The Westpac lead indicator for June fell 0.03% m/m following an upwardly-revised 0.05% rise. The 6-month rate, which leads detrended growth by 3 to 9 months, is hovering just above zero signalling that growth is likely to return to around trend towards year end. Westpac believes that sluggish growth and the Q2 CPI outcome on July 30 will enable the RBA to cut 25bp on August 12 but it will maintain a “gradual easing cycle”.
- The 6m/6m annualised change in the lead indicator printed at 0.03% in June down from 0.11%.
- Weaker commodity prices in AUD, consumer confidence, hours worked drove the moderation from December’s +0.33%. However, the ASX, lower rates and US IP have been supportive.
- Westpac is forecasting GDP growth of 1.7% in 2025 up only slightly from 2024’s 1.3%.
Australia Westpac lead indicator vs real GDP %
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AUSSIE BONDS: ACGB Nov-32 Auction Results
The AOFM sells A$1000mn of the 1.75% 21 November 2032 Treasury Bond, #TB165:
- Average Yield (%): 3.9441 (prev. 4.0080)
- High Yield (%): 3.9475 (prev. 4.0100)
- Bid/Cover: 3.3550x (prev. 3.2100x)
- Allotted at Highest Accepted Yld as % of Bid (%): 39.5 (prev. 71.6)
- Bidders: 40 (prev. 37), successful 17 (prev. 13), allocated in full 11 (prev. 6)
US STOCKS: Open In Asia Under Pressure
The ESU5 Friday night range was 6003.25 - 6071.00, Asia is currently trading around 5993. The market has gapped lower on the Asian open but no real follow through as yet as investors digest the implications of the weekend's bombing. ESU5 -0.41%, NQU5 -0.52%. In the short-term this should provide headwinds for US Equity and add to already mounting pressures for the week as month-end approaches.
- The ESU5 looks to be building a rounded top, indicating a potential retracement is possible. First support is the 5800 area, a break back above 6100 is needed to see the upward momentum reignited.
- (BBG) - “Apple executives discussed acquiring startup Perplexity AI, which was valued at $14 billion in its most recent funding round, people familiar said. A deal would help Apple develop its own AI-based search engine, swapping out Google as its default browser.”
- The market has been burned by being underweight US Equities and has been forced back in over the last few weeks. Investors will be focusing on how long the US plans to be involved and if the conflict will become extended. The market is hesitant to sell again but the headwinds are building.
- Share buybacks are now in their blackout period, will the absence of this large underlying bid reportedly around $40 billion a week, allow for some sort of a retracement.
- This together with what looks to be some large month-end rebalancing should provide some decent headwinds for US Equities in the short-term. This added to the Geopolitical picture points to a market that might trade heavy for the week.
Fig 1: SPX Hourly Chart
Source: MNI - Market News/Bloomberg Finance L.P
AUSSIE BONDS: ACGB Nov-32 Supply Faces A Lower Yield But A Similar Curve
The Australian Office of Financial Management (AOFM) will today sell A$1000mn of 1.75% 21 November 2032 bond. The line was last sold on June 11 for A$1000mn. Several other factors could influence the bidding at today’s auction.
- First, the outright yield is 10bps lower than at the time of the previous auction, and roughly 70bps below the November 2024 peak.
- Second, the 3/10 yield curve is around the same level as the previous auction, around 20bps below its recent high.
- On the positive side, mid-curve ACGBs is likely to be supported by expectations of further RBA easing. A 25bp rate cut in July is given an 83% probability, with a cumulative 76bps of easing priced by year-end (based on an effective cash rate of 3.84%).
- On the downside, this line is not included in the XM basket and falls within a less preferred segment of the curve.
- Despite the mixed signals, today’s auction is expected to offer further insights into demand dynamics for ACGBs amid evolving market expectations.
- Results are due at 0200 BST / 1100 AEST.
