The ASX looks likely to edge lower when it opens this morning, following a drag on trade in the US as investors weighed banking risks on the horizon.
ASX futures were down 0.18% to 7,251 early this morning.
Banking risks, JOLTS cause jitters
On Wall Street, we saw small losses – improved by a late rally – across the board, with the Dow shifting -0.6%, the S&P doing the same (-0.6%) and the Nasdaq losing -0.5%.
The US dollar dropped to a two-month low yesterday after more weak economic data reinforced the notion that the Federal Reserve is at the end of its hawkish months-long rate rising stint.
Sterling is sitting at a 10-month high against the dollar, while the euro is the highest it’s been since February. The Aussie dollar was little changed, trading at 67.52 US cents, down 0.02%.
Further underscoring the potential for the US economy to flatline, February Job Openings and Labor Turnover Survey (JOLTS) data showed that US labour demand is low, with job openings dropping 632,000 to 9.9 million, their lowest in nearly two years. This has been accompanied by a decline in factory orders.
“The JOLTS job openings data is viewed as a much better guide to the state of the labour market than the ADP (NASDAQ:ADP) Employment report to be released tonight and a firm sign that the labour market is softening,” said IG analyst Tony Sycamore.
“The dour JOLTs jobs data compounded by the release of weak factory orders data (-0.7% vs -0.5% exp) and a warning from JP Morgan CEO Jamie Dimon that the impact of the banking crisis will be felt for years.
“Overnight, the S&P500’s recent advance stalled just below the top of its four-month 3,800/4,200 range.
“While we can’t rule out a brief false break higher, we see the 4,200 area as the right area to lighten exposure looking for a retest of the bottom of the range at 3,800ish in the months ahead.”
Housing market reheats
Back home, you can almost hear the celebrations in households and businesses the country over following the RBA’s decision to pause its run of rate rises for now, keeping the three in front of the cash rate for at least the next month – by comparison, across the ditch, the cash rate is likely to move 5.00% when the RBNZ meets.
But perhaps these celebrations are premature.
Australia's property market is never far from a rolling boil but it has been flat since April 2022. New data suggests the cooling is coming to an end – and we know how rates and the property market impact each other.
The day before the rate announcement, leading property analytics firm CoreLogic reported renewed growth in the housing market, with the most expensive market, Sydney, leading the charge.
Data indicated that Australian property prices rose 0.6% in March, the first rise since this time last year. Sydney’s median house price edged back over the million-dollar mark, recording a 1.4% gain.
The rate pause may throw gasoline on the housing market, in turn putting pressure back on the RBA.
Sycamore noted: “The RBA reiterated yesterday that its main priority is to return inflation to target and left the door open to future rate hikes depending on incoming data.
“Contrary to this, the interest rate market is fully priced for a 25bp rate cut by the end of this year.”
We’ll see what Philip Lowe has to say when he gives a speech today, scheduled for 12:30pm AEST.
In other news
Global oil prices rose by up to 0.4% on Tuesday, as investors assessed the competing forces of voluntary output cuts by oil-producing countries and weak economic data out of the US and Europe.
Brent crude rose by 1 US cent to US$84.94 a barrel, while US Nymex crude added 29 US cents or 0.4% to US$80.71 a barrel.
Base metal prices eased on Tuesday, with copper futures falling by 1.9% and aluminium futures losing 1.3%.
By contrast, gold futures were up US$37.80 or 1.9% to US$2,038.20 an ounce and spot gold was trading near US$2,022 an ounce at the US close.
Iron ore futures fell by US$1.95 or 1.6% to US$120.24 a tonne.