ASX 200 futures point 1.2% lower as the US 10-year yield reaches 5.11%

Sentiment: bearish ASX 200 futures: -1.2%

ASX SPI 200 futures settled at 8,708 points, down 1.2%, after the US 10-year Treasury yield rose 14.6 basis points to 5.114%, its highest level since 2007, on a September flash PMI that put US business activity at a five-year high. Alphabet GOOGL.US fell 3.80% and was the heaviest single drag on the S&P 500, while the Nasdaq Composite ended two straight record closes at 26,936.0, down 1.13%. The Australian dollar fell 1.11% to US$0.7041 against a US dollar index up 0.51% to 101.12, and Brent crude traded back above US$103 a barrel.

Overnight drivers

• US flash PMI at a five-year high: S&P Global's composite index rose to 58.4 in September from 56.0 in August, with services at 58.7 against a 56.0 forecast. The survey's input-price gauge reached 66.4, the highest reading since October 2022. Interest-rate futures moved to price the Federal Reserve's next move as a rise at the 27 to 28 October meeting, and yields rose across the curve.
• A short-end-led bond selloff: the 5-year yield rose 15.5 basis points to 4.997%, above 5% for the first time since 2007; the 10-year rose 14.6 basis points to 5.114%; the 30-year rose 9.8 basis points to 5.401%. TLT.US, the 20-year Treasury ETF, fell 1.58%.
• Rate-sensitive equities fell hardest: utilities XLU.US fell 1.92%, real estate XLRE.US 1.55% and the Russell 2000 1.77%, against technology XLK.US at -0.47%. The same discount-rate arithmetic applies to CBA.AU, GMG.AU and APA.AU at the local open.
• Crude reversed higher: Brent returned to US$103.37 a barrel after Iran attached conditions to reopening the Strait of Hormuz, ending five sessions of declines. Energy XLE.US rose 0.96%, the only sector proxy in this list to finish up.

Overnight Wall Street

• S&P 500: 7,706.03 (-0.75%)
• Nasdaq Composite: 26,936.04 (-1.13%)
• Dow Jones: 51,511.59 (-0.68%)
• Russell 2000: 2,838.66 (-1.77%)
• VIX: 15.18 (+6.83%)

The largest technology names took the most selling. GOOGL.US fell 3.80%, AMZN.US 2.24%, AVGO.US 2.62%, MU.US 2.22% and NVDA.US 1.47%, with AAPL.US down 0.80%. META.US rose 1.02% and holds a 12% gain for the week after the reception for its Muse AI assistant, and MSFT.US added 0.52%. The Russell 2000 fell 1.77% against the Dow's 0.68%. Small caps refinance at the short end, and the 5-year yield moved 15.5 basis points, more than any other tenor.

Commodities and FX (AU-relevant)

• Gold: US$4,326/oz (+0.18%)
• Brent: US$103.37 (recovered above US$100)
• Copper: US$6.79/lb (+0.49%)
• Iron ore: Dalian January contract 712 yuan/t (+0.07%)
• AUD/USD: 0.7041 (-1.11%)

Gold held its level through a 0.51% rise in the US dollar index and a 14.6 basis point rise in the 10-year yield, a combination that usually costs bullion more than 0.18%. NST.AU and EVN.AU open with the metal 0.18% higher than Wednesday. Iron ore moved 0.07% in Dalian trade, so BHP.AU, RIO.AU and FMG.AU open with no commodity input either way. The AUD at 0.7041 raises the Australian-dollar value of US revenue for CSL.AU, RMD.AU and JHX.AU by about 1.1% against Wednesday's rate.

Key themes for ASX open

• Energy: Brent at US$103.37 is a direct input to WDS.AU and STO.AU realised pricing, after five sessions in which the local energy sector priced a Hormuz reopening.
• Banks and REITs: a 5.114% US 10-year resets the global discount rate that prices CBA.AU, WBC.AU and GMG.AU. The ABS labour force print at 11:30 AEST sets the domestic leg.
• Technology: XRO.AU and WTC.AU track the Nasdaq's 1.13% fall, and the same rate move that hit long-duration US names applies to Australian software multiples.
• Gold miners: NST.AU and EVN.AU open against a gold price that finished 0.18% higher despite the dollar move.

Economic calendar today (AEST)

• 11:30, ABS August labour force. Consensus is 20,000 jobs added with unemployment steady at 4.5%; Commonwealth Bank forecasts 15,000. July recorded a 16,000 fall.
• Next week, 29 to 30 September, RBA board meeting. All four major banks expect a rise, and governor Michele Bullock said on 22 September that unemployment needs to sit between 4.5% and 5% to bring inflation down.

What to watch

• The 11:30 print is the last labour reading before the RBA decision, and Australian flash manufacturing PMI already fell to 49.3 in September from 52.0 in August. A jobs number near consensus leaves the domestic rate path where the market has it.
• S&P 500 futures are up 0.06% and Nasdaq 100 futures up 0.09% into the Australian open, so the overnight cash decline is not extending in futures.
• The AU VIX finished Wednesday at 11.00, down 3.49%, which is a low starting point for a session opening 1.2% down on futures.

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