Market Overview
Global markets presented a mixed picture, characterized by a robust performance in US technology stocks and continued increases in US Treasury yields. Asian sessions saw varied outcomes, while European markets are anticipated to open higher with cautious optimism. Australia’s S&P/ASX 200 rallied for the third consecutive day, demonstrating resilience despite a notable underperformance in its domestic tech sector. Meanwhile, the Euro depreciated, primarily due to intensifying concerns over France’s fiscal challenges, with investors also looking ahead to upcoming central bank minutes for policy insights.
Markets
US Equities
Overnight, US equities closed higher, with the Nasdaq Composite (^IXIC) reaching new records, advancing 1.05% to 27,477.31. The S&P 500 (^GSPC) added 0.66% to 7,773.95, and the Dow Jones (^DJI) gained 0.18% to 51,267.90. Gains were largely propelled by artificial intelligence-related stocks, and US stock futures were edging higher early Tuesday in pre-market trade.
Asian Equities
Asian markets experienced mixed trading. Japan’s Nikkei 225 (^N225) last closed higher by 1.05% at 70,683.98, and Hong Kong’s Hang Seng Index (^HSI) gained 0.76% to 24,221.93 in active trading. Conversely, South Korea’s KOSPI (^KS11) closed lower by 0.89% at 6,941.39, with major chipmakers declining. Mainland China markets remained closed for the Golden Week holiday and will resume trading on Thursday, October 8.
The S&P/ASX 200 (^AXJO) advanced for a third straight day, closing 0.57% higher at 8,735.70, led by real estate, materials, and utilities sectors. However, Australian technology stocks experienced steep declines, diverging from the strong overnight performance of their US counterparts.
European Outlook
European equity markets are broadly expected to open higher, with futures for the Euro Stoxx 50 and Stoxx 600 both indicating gains of around 0.4%. This optimistic outlook persists despite ongoing concerns over elevated bond yields and France’s fiscal situation.
Commodities
Brent Crude (BZ=F) was trading at $99.46, down 0.86%, after falling earlier in the week. WTI Crude (CL=F) stood at $88.42, down 1.13%. Global benchmark Brent crude traded little changed near $US100 a barrel following prior-day slips.
Currencies
The Australian Dollar (AUDUSD=X) traded at 0.6967, up 0.21%, climbing overnight to 62.22¢ against the Euro, its highest level since late 2024, and was trading at 62.12¢ on Tuesday. The Euro (EURUSD=X) traded at 1.1212, down 0.38%, having depreciated due to concerns about France’s fiscal health.
Bond Yields
US Treasury yields remained a key focus, with the 10-year Treasury (^TNX) tracking at 5.311%, up 3.40 bp, and the 30-year Treasury (^TYX) at 5.665%, up 3.50 bp. Both notes briefly touched 5.349% and 5.703% respectively, marking multi-year highs last seen in 2002 (10-year) and 24 years (30-year) ago. The Japanese 10-year government bond yield also rose to 3.122% on Tuesday, its highest since 2022.
What Drove Markets
Divergent Technology Performance
While the US Nasdaq Composite hit record highs, buoyed by optimism around artificial intelligence, the Australian technology sector saw steep declines, with WiseTech Global, Codan, and Megaport among those falling. Elevated US Treasury yields are noted as generally weighing on high-growth technology shares.
Rising Global Bond Yields
The continued ascent of US Treasury yields, with both 10-year and 30-year notes reaching multi-year highs, is a significant limiting factor for overall risk appetite across equity markets. This trend also impacted Japan, where the 10-year government bond yield reached its highest level since 2022, tracking the overnight rise in U.S. Treasury yields and expectations for further Bank of Japan policy tightening. Morgan Stanley Wealth Management investment chief Lisa Shalett noted that bonds have been volatile over the past six weeks, citing a potentially new Fed policy framework, economic growth, and high oil prices while the Middle East conflict stretches on as factors. However, she added that intraday implied volatility has not reached the extremes that catalyzed the 2022 equity bear market.
Eurozone Fiscal and Political Concerns
France’s budget troubles and broader political uncertainty in the region, including Spain’s upcoming snap election, are explicit concerns that contributed to selling pressure on the Euro. The French government is seeking to enact an unpopular 2027 budget to lower its deficit and contain its record-high debt load, which remains a key concern for the Eurozone. This contributed to the Australian dollar climbing to a two-year high against the Euro.
Australian Market Resilience vs. Domestic Sentiment
The ASX 200’s rally, particularly in rate-sensitive sectors like real estate, occurred despite recent ANZ and Westpac data showing Australian consumer sentiment had plummeted following last week’s Reserve Bank of Australia rate rise to 4.6 per cent. Australian job ads rose for a fifth month last month, underscoring resilient labour demand despite the RBA’s rate hikes. This upside, however, was limited by consumer confidence falling for a second month in October, reflecting higher fuel and borrowing costs.
Energy Market Developments
Global benchmark Brent crude traded near $US100 a barrel, little changed after earlier falls, with rising Persian Gulf exports and a price cut by Saudi Arabia pointing to a loosening market. Separately, President Donald Trump signed an executive order Monday evening stateside to temporarily allow truckers and farmers to use red-dyzed diesel, which is exempt from highway fuel taxes, and deferred related taxes on the fuel through the end of this year, in an attempt to bring down record-high fuel costs.
Stocks to Watch
- US Tech/AI: Several artificial intelligence-related stocks saw gains, including SpaceX (SPCX) which jumped 7.63% to 171.09, NVIDIA (NVDA) up 2.12% to 238.90, Tesla (TSLA) rising 2.20% to 378.73, Meta Platforms (META) gaining 1.90% to 741.90, and Microsoft (MSFT) up 1.48% to 525.18.
- South Korean Tech: Major chipmakers declined, with Samsung (005930.KS) closing down 1.45% at 272,000.00 and SK Hynix (000660.KS) falling 3.69% to 1,773,000.00, contributing to the KOSPI’s overall decline.
- Australian Market Leaders: On the ASX, BHP Group (BHP.AX) advanced 1.57% to 62.86, and Rio Tinto (RIO.AX) added 1.09% to 167.77. Macquarie (MQG.AX) gained 0.81% to 250.02 following news of a board conflict of interest policy review. The “big four banks” also contributed to the ASX advance, with ANZ (ANZ.AX) up 0.56% to 37.86, CBA (CBA.AX) up 0.77% to 152.38, NAB (NAB.AX) up 0.78% to 38.70, and Westpac (WBC.AX) up 0.64% to 34.66.