A rally on Wall Street overnight that sent the Nasdaq Index to a new record high has the ASX looking set to open higher this morning. The ASX SPI 200 Futures are trading up 37 points (0.48%) to 7,799.
Locally, the big news today is last night’s Federal Budget, which delivered a more than $9 billion surplus, says Finance Minister Katy Gallagher. The budget included $7.8 billion in cost-of-living measures, including $300 energy subsidies for every household.
Here are Moody’s Ratings’ vice president and senior credit officer Martin Petch’s takeaways from the Budget:
“The net impact on inflation of the 2024 Federal Budget’s cost of living related spending remains uncertain. Mechanical impacts on measures of the inflation rate may be moderately offset by additional spending in the context of a still tight labour market, delaying the Budget’s forecast relatively fast decline in inflation.
“From a fiscal perspective, the Budget modestly continues the ongoing improvement in the Commonwealth gross debt to GDP ratio. However, there are risks to this outlook.
"Looking ahead, the question is if fiscal consolidation will be sustained as structural spending pressures from the National Disability Insurance Scheme, interest payments on debt, and aged care and health spending continue to build.
“More broadly, the key issue facing Australia remains its weak productivity performance and how effective spending programs such as Future Made in Australia are in allocating resources and boosting productivity growth.”
What happened overnight?
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US markets
US sharemarkets rose on Tuesday as investors assessed a mixed producer prices report and awaited crucial consumer prices data expected on Wednesday to provide more clarity on the US interest rate path.
US producer prices increased more than expected in April but US Federal Reserve chair Jerome Powell said the report was more mixed than hot given that prior-period data was revised lower.
Chipmaker Nvidia and electric vehicle giant Tesla (NASDAQ:TSLA) led gains in the "Magnificent Seven" megacaps, up between 1.1% and 3.3%.
Super Micro Computer jumped 5.1% after GQG Partners reported a new position in the server company.
US-listed shares of Alibaba (NYSE:BABA) slid 6% after it reported an 86% drop in fourth-quarter profit. Home Depot (NYSE:HD) fell 0.1% after the retailer posted a bigger-than-expected drop in quarterly same-store sales.
- The Dow Jones index rose by 127 points or 0.3%,
- The S&P 500 index gained 0.5%, and
- The Nasdaq index added 123 points or 0.8% to a record closing high.
US government bond yields fell on Tuesday ahead of a highly anticipated consumer price inflation report on Wednesday that analysts say is likely to drive near-term US Federal Reserve policy. Fed chair Jerome Powell said he expects US inflation to continue declining through 2024 as it did last year, though his confidence in that has fallen due to the first quarter data.
The US 10-year Treasury yield fell by 4 points to 4.44% and the US 2-year Treasury yield also dipped 4 points to 4.82%.
European markets
European sharemarkets closed at a record high on Tuesday, with the automobile sector leading sectoral gains with a 1.3% rise.
- The continent-wide FTSEurofirst 300 index rose 0.1%.
- In London, the UK FTSE 100 index was up 0.2%.
Tightness in the British labour market and strong wage growth in March had investors on edge about interest rate cuts.
Anglo American (JO:AGLJ) tumbled 3.2% on reports the miner is exploring an initial public offering of its diamond business De Beers, amid urging from BHP (ASX:BHP) Group's boss to consider takeover benefits.
Currencies
Currencies were stronger against the US dollar in European and US trade.
- The Euro rose from US$1.0774 to US$1.0825 and was near US$1.0820 at the US close.
- The Aussie dollar lifted from US65.90 cents to US66.27 cents and was near US66.25 cents at the US close.
- The Japanese yen rose from 156.66 yen per US dollar to JPY156.27 and was near JPY156.40 at the US close.
Commodities
Global oil prices settled lower on Tuesday after US inflation data stoked concerns that interest rates may stay high, but potential risks to supply from Mid-East tensions and wildfires in Canada put a floor under prices.
The Brent crude price fell US98 cents or 1.2% to US$82.38 a barrel. The US Nymex crude price dipped US$1.10 or 1.4% to US$78.02 a barrel.
Base metal prices were mixed on Tuesday.
- US copper futures jumped 3.1% to a record peak, fuelled by robust demand and fund buying.
- Aluminium futures fell 0.1%.
The gold futures price rose US$16.90 or 0.7% to US$2,359.90 an ounce on Tuesday, helped by a pullback in the US dollar and US Treasury yields. Spot gold was trading near US$2,357 an ounce at the US close.
Iron ore futures slid US66 cents or 0.6% to US$116.65 a tonne after China's Agile Group Holdings, a developer of villa apartments and high-rise homes, defaulted for the first time on publicly issued dollar bonds.
What’s on?
In Australia, the Wage Price Index (WPI) is issued. CSR releases earnings. Waypoint REIT hosts an AGM.
In China, the 1-year medium-term lending facility rate is announced.
In the US, the Consumer Price Index (CPI) is scheduled with retail sales data and business inventories. The Empire State manufacturing index and NAHB housing market index are also both due. Cisco (NASDAQ:CSCO) releases earnings results.
On the small cap front
The S&P ASX Small Ordinaries ended 0.05% higher yesterday, while the ASX200 lost 0.30%.
You can read more about the following throughout the day.