Last Week in Markets
Both US and Australian equities retreated last week, pressured by higher long-term bond yields and mixed earnings results driving volatility across sectors.
The S&P 500 fell 1.43% last week as long-end yields climbed to their highest level since 20071. Rate-sensitive and growth sectors led declines, with Utilities and Information Technology among the weakest performers. Long-term bond yields have risen amid higher energy prices stemming from the US-Iran war, concerns around the Fed's credibility in containing inflation, and increased debt issuance by hyperscalers. Underpinning these pressures is the deteriorating US fiscal position, with national debt exceeding US$40 trillion. US Treasury Secretary Scott Bessent sought to ease pressure by increasing buybacks of long-dated Treasuries, although yields retraced higher by week's end. Health Care outperformed, led by Moderna, while Energy and Materials benefited from higher oil prices and gains in gold and copper.
The S&P/ASX 200 fell 0.16% last week, with mixed earnings results and the global bond market sell-off driving market performance. Consumer Discretionary was the weakest sector, led lower by JB Hi-Fi after reporting softer Q4 comparable sales.2 Real Estate and Information Technology also underperformed as rising bond yields and weakness across global semiconductor stocks weighed on sentiment. Offsetting some of these declines, Health Care and Materials outperformed, supported by strong results from CSL and BHP. Meanwhile, the unemployment rate edged higher to 4.5%, however, interest rate expectations remained largely unchanged.
The Week Ahead
- Jackson Hole Symposium: Markets will focus on Kevin Warsh's speech on Friday for further clarity on the Fed's policy outlook and the direction of long-term interest rates.
- Australian Inflation: Australian inflation data will be closely watched for its implications on the RBA's rate trajectory following signs of softening labour market conditions.
- Australian Earnings Season: Reporting season continues this week, with earnings results remaining a primary driver of sector-specific performance.
In the World of Commodities
- Gold: (GOLD) rose to around US $4,600 last week, supported by a weaker US dollar and the Treasury's decision to increase purchases of long-dated government debt, which briefly pushed yields lower. Despite yields subsequently retracing, gold continued to rally, suggesting investors remained focused on concerns around US fiscal spending and currency debasement.
- Bitcoin: Bitcoin (EBTC) rose roughly 20% over the week, benefiting from many of the same drivers that supported gold. Institutional participation also strengthened, with spot Bitcoin ETFs recording US$1.92 billion in weekly inflows, their largest weekly intake since October.3
- Brent Crude Oil: Oil prices rose above US$90 per barrel as the expiry of the US-Iran peace agreement and continued threats to economic relations heightened geopolitical tensions and supply concerns.4
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