ASX Set for Decline After Modest Wall Street Gains

The Australian share market is expected to open lower on Thursday, following small gains on Wall Street during the previous trading session. Futures indicate a potential decline of 0.37%, translating to a drop of approximately 31 points at the opening.

This anticipated drop comes after a strong showing by the ASX on Wednesday, where it recorded an increase of 0.8% fueled by positive inflation data that bolstered investor optimism regarding potential interest rate cuts in the near future.

In the United States, Wall Street managed to maintain a slight upward movement overnight. However, market conditions were mixed, as strong economic reports have raised concerns about the possibility of sustained high inflation and interest rates. The S&P 500 index edged up by 0.2%, recovering part of its 1.1% decline experienced the day before. The Dow Jones Industrial Average added 106 points, reflecting a 0.3% increase, while the Nasdaq Composite saw a slight decrease of 0.1%.

Currency and Bond Market Updates

The Australian dollar weakened a bit on Thursday morning, settling at 62 US cents. In the bond market, which has recently garnered significant attention on Wall Street, movements were generally subdued following last month’s rise in yields. Elevated yields tend to weigh on stocks, as they increase borrowing costs for both companies and consumers, prompting some investors to shift their focus away from stocks toward bonds.

After economic reports released on Wednesday were not as robust as those from Tuesday, a sense of calm returned to the market. This shift can paradoxically benefit Wall Street by fostering hopes that the Federal Reserve may continue to reduce short-term interest rates. Market participants favor lower rates as they can invigorate the economy and enhance the appeal of investments.

Federal Reserve Outlook

In a speech on Wednesday, Federal Reserve governor Christopher Waller reaffirmed his expectations for further rate cuts in 2025, countering speculation that the central bank might pause after already implementing three cuts since September. Waller noted that any upcoming tariffs under President-elect Donald Trump are unlikely to significantly impact inflation trends. He acknowledged the persistence of inflation but remains optimistic about a long-term downward trajectory.

Waller stated, "If the outlook progresses as I have described here, I will support continuing to cut our policy rate in 2025. The speed of those cuts will depend on how much progress we make on inflation while ensuring the labor market remains stable." The yield on the two-year Treasury, which often reflects expectations for Federal Reserve actions, declined shortly after Waller’s address and a couple of economic reports were released.

Job Market Insights

One of the recent reports indicated that U.S. employers outside of the government reduced their hiring pace in December more than economists had anticipated. This data may provide insights into the more comprehensive jobs report from the Labor Department scheduled for release on Friday. Investors are watching this report closely, as a solid performance could alleviate recession concerns, while an excessively strong report might hinder the Fed's ability to continue cutting rates.

When evaluating Wall Street's performance, eBay stood out with a significant jump of 9.9% as it began a collaboration with Meta Platforms. Under this partnership, selected eBay listings will be displayed on Facebook Marketplace in the U.S., Germany, and France, offering new visibility for eBay's offerings.

Meanwhile, Cal-Maine Foods also saw gains, climbing 1% after reporting better-than-expected profits for the most recent quarter. The company's CEO attributed this success to heightened demand stemming from seasonal trends ahead of Thanksgiving.

Overall, the S&P 500 rose 9.22 points to close at 5918.25. The Dow Jones Industrial Average increased by 106.84 points to reach 42,635.20, while the Nasdaq Composite slipped by 10.80 points to finish at 19,478.88. International markets displayed a mixed picture, with South Korea’s Kospi climbing 1.2% but Hong Kong’s Hang Seng index falling by 0.9%.ASX, WallStreet, Inflation