Wall Street saw healthy gains overnight, and the ASX is expected to catch the enthusiasm when it opens today. ASX futures were up as much as 35 points or 0.52% to 6,758 early this morning.
The three major indices in the US were all pointing up, with the Dow Jones adding 1.4%, the S&P 500 up 1.8% and the Nasdaq gaining 2.1% - the latter having just experienced a seven-day slide. US bond yields peaked at multi-year highs and fell overnight.
One sector enjoying a bump was the airline industry, which gained after United Airlines (up 5%) raised its sales forecast.
Bitcoin (1.8%), Atlassian (NASDAQ:TEAM) (2.5%), Tesla (NASDAQ:TSLA) (3.4%), Amazon (NASDAQ:AMZN) (2.7%) and Netflix (NASDAQ:NFLX) (4.8%) all saw reasonable gains.
In Europe, there was milder optimism as the continent awaits the next policy meeting of its central bank, with the Stoxx 50 up 0.1%, the CAC adding 0.02% and the DAX up 0.4%, while the FTSE was down 0.9%. So was the Stoxx 600 (-0.6%) on the back of falling oil prices.
The Aussie dollar was trading at 67.68 US cents, up 0.5% on yesterday.
Mortgage pain to bite
There is some optimism out there that the RBA’s recent rate hike may be the last of the aggressive double hikes we see for a while.
That said, the pain for borrowers is in the mail, with the heft of the mortgage increases to hit around Christmas time – a cheerful thought.
The pressure on borrowers was made clear by Martin North from Digital Finance Analytics, who told Radio National Breakfast that it takes a while to work through the banks’ processes.
“Normally it’s two to three months before the full effect hits the bank accounts of borrowers, which means that only so far have the first couple of increases really hit home.”
North said that on his company’s measure, which looks at cashflow – more money out than money in – the mortgage stress numbers have gone up to 46% or 1.7 million households registering in that category, which is more than he has ever seen.
“We are very much facing into a gale at the moment, and I’m not sure that some households really understand what’s coming down the tubes,” he said.
Breaking down the national accounts
The Australian economy was up 0.9% in June, according to the Australian Bureau of Statistics.
Year on year, GDP rose 3.9%, which reflected that we’re in a better place than we were in the midst of the Delta variant COVID wave that hit the country at the start of the 2021 winter, when GDP grew by a weaker 1.6%.
Households are saving less now – the household saving ratio decreased to 8.7% from 11.1%, perhaps reflecting the first two rate rises included in the data, but perhaps also telling the story that Australians are keen to get out after two years of lockdowns.
Put another way, household spending rose 2.2% this quarter, with spending on services increasing 3.6% to exceed pre-pandemic levels for the first time.
Eased travel restrictions meant holidays were back on the agenda and there was accelerated spending on transport and other related services.
Hotels, cafes and restaurants (+8.8%), transport services (+37.3%) and recreation and culture (+3.6%) featured in the increased spending.
The terms of trade rose 4.6%.
The ledger also showed that a third of national income went to profits (32.9%) while a record low share went to wages (48.5%).
These figures may in part be due to the current mining boom, with profits surging almost 17% to $83 billion for the quarter on high commodity prices. If you didn’t factor this boom in, the ABS said, the profit-wage share would be closer to recent averages.
In other news
Global oil prices slid more than 5% overnight to a seven-month low as the strong US dollar and continued concerns about Chinese demand triggered a sell-off.
Brent crude fell by US$4.83 or 5.2% to US$88.00 a barrel, while US Nymex crude slumped US$4.94 or 5.7% to US$81.94 a barrel.
Spot gold added 0.8% and was sitting at US$1715.02 an ounce at 2.24pm New York time, while iron ore lost -0.5% and was trading at US$96.90 per tonne, which is understandable given ongoing jitters about Chinese lockdowns.