The ASX is set to rise today as investors prepare to factor in the week’s CPI and retail sales data. The markets have also welcomed US Fed Reserve chair Jerome Powell’s assertion on Friday (Saturday AEST) that the 'time has come' for rate cuts.
ASX 200 futures are 0.5% higher at 8,025 points.
A positive start today follows on from last week’s gains.
The ASX200 concluded last week with a 52-point gain (+0.66%), closing at 8,023. This increase marked 10 consecutive days of upward movement, a milestone not achieved in the last decade, continuing the index’s recovery from its early August low of 7,628.
The strongest performing sectors last week were Information Technology (+8.65%), Industrials (+2.14%), Materials (+1.79%) and Telecommunications (+1.09%). Conversely, the Energy (-3.28%), Real Estate (-1.16%) and Financial (-0.11%) sectors ended the week in negative territory.
At the stock level, top performers included Humm Group (+38.61%), Nuix (+34.98%), Wisetech Global (+28.15%) and Appen (+27.85%). On the other hand, Inghams (-21.77%), Megaport (-18.87%), Insignia Financial (-18.53%) and A2 Milk (-17.69%) were among the biggest decliners.
“This week, all eyes turn to Wednesday's Monthly CPI Indicator for July,” IG Markets analyst Tony Sycamore said.
“In June, the headline Monthly CPI indicator rose 3.8% YoY, easing from 4.0%, with core inflation easing to 4.1% from 4.4% prior.
"This month, the headline CPI indicator is expected to fall to 3.3% YoY, reflecting a sharp fall in energy prices following the start of the Federal Government's energy rebates.
"The Australian interest rate market is pricing in 25bp of RBA rate cuts by year-end and a cumulative 73bp of cuts by May 2025.
“On the corporate front, the Australian June half-profit reporting season rolls on, with earnings reports expected from heavyweights including Perpetual, BHP (ASX:BHP), Coles, Fortescue (ASX:FMG), Nine Entertainment, Tabcorp, Wesfarmers (ASX:WES), Woolworths, Mineral Resources and Qantas.
"Particular attention will be focused on BHP, where investors are eager for good news following its near 19% drop this year. The market is looking for revenues of US$28.2 billion, EBITDA of US$15 billion and a dividend per share of US$0.82, up from US$0.72 in the first half.”
US markets rally
US stock markets rallied on Friday night following Federal Reserve chair Jerome Powell's speech at Jackson Hole, where he remarked, "the time has come for policy to adjust".
Over the week...
- The S&P 500 rose by 1.45%.
- The Dow Jones increased by 1.27%.
- The Nasdaq gained 1.1%.
In his speech, Powell emphasised that the balance of risks had now shifted towards the labour market. He highlighted that the labour market had significantly cooled and was unlikely to contribute to elevated inflationary pressures.
Powell also stated that the Federal Reserve did not "seek or welcome further cooling in labour market conditions".
“While Powell did not comment on the size or pace of the cutting cycle, saying it 'will be dependent on ‘incoming data, the evolving outlook and the balance of risks’, there was language that opened the door for a 50bp cut in September,” Sycamore said.
“The rates market is pricing in a 75% chance of a 25pb cut and a 25% chance of a 50pb cut in September . The August NFP report due on September 6 will be pivotal in deciding which it is.
"If the US economy were to create less than 100,000 jobs in August and if the unemployment rate were to print at 4.3% or higher it would tip the balance in favour of a 50bp Fed cut in September.”
Over in Europe
European sharemarkets advanced on Friday following US Federal Reserve chair Jerome Powell's statement that "the time has come" to reduce US interest rates.
Rate-sensitive real estate stocks surged 1.3%, reaching an 18-month high, while utilities, often considered a bond proxy, gained 1%.
- The continent-wide FTSEurofirst 300 increased by 0.5%, marking its third consecutive weekly gain, up 1.3% overall.
- In London, the UK FTSE 100 index also rose 0.5% on Friday, ending the week 0.2% higher.
Currencies and commodities
Currencies
Strengthened against the US dollar in European and US trading on Friday.
- The Euro advanced from US$1.1106 to US$1.1200, settling near US$1.1190 at the US close.
- The Australian dollar rose from US$0.6715 to US$0.6797, closing around US$0.6790.
- Meanwhile, the Japanese yen surged from 146.48 yen per US dollar to JPY144.04, finishing near JPY144.35 at the US close.
Commodities
Global oil prices climbed over 2% per barrel on Friday following comments from the US Federal Reserve chair, which suggested the central bank was preparing to cut interest rates.
- Brent crude increased by US$1.80 or 2.3% to US$79.02 per barrel.
- The US Nymex crude price rose by US$1.82 or 2.5% to US$74.83 per barrel.
- For the week, Brent dipped 0.8%, and Nymex fell 2.4%.
Base metal prices rose on Friday, buoyed by optimism about potential US interest rate cuts.
- Copper futures gained 1.3% and aluminium futures jumped 2.9%.
- Over the week, copper was up 1.6% and aluminium soared 8.2%, marking the largest gain since mid-April, driven by tight supplies of alumina and bauxite.
- The gold futures price increased by US$29.60 or 1.2% to US$2,546.30 per ounce as the US dollar and US Treasury yields declined.
- Spot gold traded near US$2,510 per ounce at the US close, with bullion up 0.3% for the week.
- Iron ore futures dipped by US$0.14 or 0.1% to US$98.05 per ton on Friday, as concerns over a near-term drop in China demand prompted renewed caution among investors. However, expectations of improved demand during the upcoming peak construction season pushed prices up 0.2% for the week.
Small caps finish down
The S&P/ASX Small Ordinaries (XSO) finished 0.71% down on Friday at 3,016.40. Over the five trading days, it lost 0.19%
There has been a steady flow of news this morning and you can read about the following and more throughout the day.