Inflation figures and retail data could put rate rises on hold in Australia as the US stays hawkish By Proactive Investors
© Reuters The morning catch up: Inflation figures and retail data could put rate rises on hold in Australia as the US stays hawkish
Wall Street was mixed yesterday as Fed chair Jerome Powell hinted at more rate hikes. The news has trickled over to the ASX, with futures down just 2 points to 7,151 at the end of the US session.
The local market won’t be hit too hard today after rising 1.25% yesterday.
As we noted at the end of the session, investors were likely encouraged by the monthly CPI indicator data, which rose 5.6% in the 12 months to May 2023.
“This month’s annual increase of 5.6% is the smallest increase since April last year,” ABS head of prices statistics Michelle Marquardt said.
“While prices have kept rising for most goods and services, many increases were smaller than we have seen in recent months.”
Federal Treasurer Jim Chalmers welcomed the news.
“There was quite a welcome moderation in the inflation numbers we saw yesterday. Australians are still under the pump, we know that, but inflation is moderating off that peak we saw around Christmas time, that’s a good thing. No doubt, the Reserve Bank and its board will factor that in,” he told Sky News.
A bigger-than-expected surplus would help the government roll out its cost-of-living relief without adding to inflation.
“I think it’s important to recognise the bigger surplus doesn’t come at the expense of cost of living help for Australians … It means we can provide that $15 billion in cost of living to help take some of the edge off these pressures without adding to inflation,” he said.
Today we’ll see retail data released.
Inflation figures and retail data could allow the Reserve Bank of Australia (RBA) to put interest rates on hold until July.
IG Markets analyst Tony Sycamore said: “The door is open for the RBA to move to the sidelines in July and wait for the quarterly inflation number (July 26) to decide whether further rate hikes are needed.
“Remember also that the RBA meeting minutes were not as hawkish as expected. All eyes now turn to the release of Retail Sales for May at 11.30 am today. The market is looking for a rise of 0.1% MoM, up marginally from 0% in April.”
What happened in the markets
Here’s what we saw overnight (source Commsec):
US markets
Were mixed on Wednesday. The prospect of further interest rate hikes dampened sentiment after US Fed chair Jerome Powell said he did not see inflation falling to the central bank’s target rate “this year or next year”.
Apple (NASDAQ:) (+0.6%) shares hit an all-time high, while shares of Tesla (NASDAQ:) (+2.4%), Microsoft (NASDAQ:) (+0.4%), Netflix (NASDAQ:) (+3.1%) and Alphabet (NASDAQ:) (+1.6%) also gained. Chipmaker Nvidia’s shares fell by 1.8% after the Wall Street Journal reported the US could impose new curbs on exports of artificial intelligence chips to China.
Shares of General Mills (NYSE:) slid 5.2% after the packaged food maker forecast full-year profit below analysts’ estimates. The S&P banks index slid 0.5% ahead of the Fed’s annual stress test results due out after market close.
The fell by 74 points or 0.2%. The S&P 500 index inched lower by just 1.6 points or less than 0.1%. The added 36 points or 0.3%.
European markets
Rose on Wednesday, trimming recent declines, as technology shares rallied by 1.9% and real estate stocks tracked bonds higher, finishing up 1.8%.
The continent-wide index rose by 0.7%. The UK lifted 0.5%, despite hawkish comments on inflation from Bank of England Governor Andrew Bailey.
Currencies
Currencies were weaker against the US dollar in European and US trade.
- The Euro fell from US$1.0959 to US$1.0897 and was near US$1.0910 at the US close.
- The dollar fell from US66.50 cents to US65.97 cents and was near US66.00 cents at the US close.
- The Japanese yen dipped from 143.85 yen per US dollar to JPY144.58 and was near JPY144.50 at the US close.
Commodities
Global oil prices rose by up to 2.7% on Wednesday as the second straight weekly draw from US crude stockpiles was bigger than expected. The US Energy Information Administration (EIA) said crude inventories dropped by 9.6 million barrels last week, exceeding the 1.76 million barrel draw analysts forecast.
- The price rose by US$1.77 or 2.4% to US$74.03 a barrel.
- The US Nymex crude price gained US$1.86 or 2.7% to US$69.56 a barrel.
Base metal prices tumbled on Wednesday.
- The price fell by 1.6% on concern about weak industrial profits in top metals consumer China and further US interest rate hikes dampening economic growth and metals demand.
- The aluminium futures price slipped by 1%.
- The price fell by US$1.60 or 0.1% to a near four-month low of US$1,922.20 an ounce.
- was trading near US$1,907 an ounce at the US close.
- Iron ore futures added US4 cents or less than 0.1% to near three-month highs of US$112.64 a ton despite weak Chinese industrial data.
On the small-cap front
Plenty of activity on the small-cap front already this morning after it finished 1.645 higher yesterday. Here’s what’s happening. You can read our full reports of these and more throughout the day.
