It’s that time of the month again. The Reserve Bank of Australia (RBA) will meet tomorrow to discuss how much to raise the cash rate. Another 0.5% is predicted, however, it could be lower if …
Ahead of tomorrow’s meeting, the ASX will open lower today. The ASX Futures (SPI 200) point to the ASX 200 opening 16 points lower, down -0.24%.
The drop is no surprise as Wall St failed to hold onto its early gains and the likelihood of June lows returning continues to increase as US markets fade.
2022 a bear market
2022 will be known as a bear market. This year is on pace to be the most bearish year in the history of the US AAII Investor Sentiment Survey: bearish sentiment currently sits at 45.9% compared to GFC levels of 45.2%.
Wall St finished the week with all three major benchmarks booking a third straight losing week, with positive August jobs data doing little to alter the view that the Federal Reserve would press ahead with a large interest rate rise in late September.
“From a market perspective, it keeps the debate of a 50 or 75 basis points move by the Fed at the end of the month on the table,” chief market strategist at Ameriprise Financial (NYSE:NYSE:AMP)'s Anthony Saglimbene said.
“Market odds are suggesting they move 75 basis points, but with today’s labor report, I think the inflation data later this month is going to be the key data.”
The central bank’s next rate hike is expected at its September 20-21 meeting.
News that Russia’s Gazprom (MCX:GAZP) won’t reopen a natural gas pipeline to Europe on Saturday also hit the market sentiment where it hurts as investors headed into the US Labor-Day holiday weekend.
Gazprom said it could not restart production as expected after a gas leak.
Natural gas supply is of “critical importance in assessing the economic outlook for Europe as we head into the winter,” chief investment strategist for North America at Northern Trust (NASDAQ:NTRS) Asset Management Chris Shipley told MarketWatch. A European recession would be “negative for sentiment toward risk assets globally.”
The Dow Jones Industrial Average dropped 337.98 points, or 1.1%, to close at 31,318.44 while the S&P 500 fell 42.59 points, or 1.1%, to finish at 3,924.26.
The Nasdaq Composite lost 154.26 points, or 1.3%, to end at 11,630.86, falling for a sixth straight day in its longest losing streak since August 2019.
Here’s what we saw:
- The Euro rose from near US$0.9960 to highs near US$1.0030 but was back near US$0.9950 at the US close.
- The Aussie dollar rose from near US67.80 cents to highs near US68.55 cents and was back near US68.08 cents at the US close.
- The Japanese yen held between 139.94 yen per US dollar and JPY140.77 and was near JPY140.20 at the US close.
- Global oil prices rose by around 0.5% on Friday. The OPEC+ production group is expected to keep oil output quotas unchanged for October at today's meeting. US jobs data supported oil prices.
- The Brent crude oil price rose by US66 cents or 0.7% to US$93.02 a barrel.
- The US Nymex crude oil price rose by US26 cents or 0.3% to US$86.87 a barrel. Over the week Brent crude fell US$7.97 or 7.9% and Nymex crude fell US$6.19 or 6.7%.
- Base metals were mixed on Friday. Zinc fell 4.5% but nickel rose 1.1% and copper rose 0.5%. Over the week metals fell 4.9-14.6%.
- The gold futures price rose by US$13.30 an ounce or 0.8% to US$1,722.60 an ounce. Spot gold was trading near US$1,711 an ounce at the US close. Over the week gold fell US$27.20 or 1.6%.
- Iron ore futures slid US$1.05 or 1.1% to US$95.34 a tonne. Over the week iron ore fell US$10.04 or 9.5%.
European markets bucked the general global trend.
The pan-European STOXX 600 index was up by 2.0% - the first rise in six sessions. Over the week the STOXX 600 index fell 2%.
Credit Suisse (SIX:CSGN) rose 6.1% on reports that Switzerland's second-biggest bank is considering cutting around 5,000 jobs.
The German Dax index lifted by 3.3%. And the UK FTSE index rebounded by 1.9%.
In London trade, shares in Rio Tinto (ASX:RIO) rose by 2.0% and shares in BHP (ASX:BHP) gained 2.5%.
In the news
Pension payment boost
Australian pensioners will receive the biggest welfare raise in 12 years and will receive an extra $20 a week, which may pay for a pie and coke during the footy finals.
The payment will reach 4.7 million Aussies and take effect from September 20.
The age pension will rise from $987.60 to $1,026.50 a fortnight for singles, or $38.90.
Couples will gain an extra $58.80 a fortnight, taking their payment to $1,547.60 per couple.
Any increase is welcome, but problematically it comes as the moratorium on the fuel excise is lifted.
“This indexation increase will help those on government payments keep up with the cost of living,” Social Services Minister Amanda Rishworth said.
“Our guiding principles as a government are ensuring no one is left behind and no one is held back.
“We want to ensure Australia has a strong social security safety net to protect our most disadvantaged.”
The increase is timely with inflation rising 1.8% in the June quarter and 6.1% annually. It is expected to peak to peak at 7.75% in the December quarter.
Albo calls on RBA to consider policy effects
Prime Minister Anthony Albanese has urged the RBA to consider any effects on struggling Australians a rate rise may have.
However, he is not budging on his stance of keeping the fuel excise moratorium.
He has also said there was no guarantee that multi-employer bargaining would be adopted and that it would depend on businesses “opting-in” to the new arrangements.
“We don’t have the legislation before us,” Albanese told ABC radio. “We made it clear at the summit that there was a range of measures on which there was agreement.
“What we are talking about here is the fact that the Council of Small Business said there were circumstances where multi-employer bargaining could really assist small businesses as well as their employees.”