After a strong showing yesterday, when the ASX 200 gained 0.86% and all sectors ended the day higher, the local market is expected to open lower this morning. The ASX SPI 200 Futures is down 42 points (-0.54%) to 7,771.
The OECD's latest employment outlook has disclosed that in Australia real wages, which are adjusted for inflation, are nearly 5% lower than they were just before the start of the COVID pandemic.
Australia's -4.8% drop was among the largest of its member countries and our wages lag many other nations, including the UK, US, Germany and Spain.
Real wages grew in 2024 for the first time in nearly three years but households still face pressure from the cost of living crisis.
The OECD also revealed that workers in high-emission sectors were likely to face greater earnings losses and job displacement.
The report stated, "Workers in these sectors face greater earnings losses after job displacement, averaging a 36% decrease over six years after job loss compared to 29% in other sectors.
“Policies that support incomes and facilitate job transitions are essential to mitigate these losses and ensure support for the net-zero transition."
Overseas markets
Overnight, US sharemarkets remained within sight of record highs and once again recorded modest moves on Tuesday.
- The Dow Jones index fell 53 points or 0.1%;
- The S&P 500 index rose 4 points or 0.1%; and
- The Nasdaq index rose 25 points or 0.1%.
Investors reflected on Fed chair Powell's measured Congressional testimony and kept their powder dry ahead of the looming CPI report due in the next day.
Powell said the US economy was "no longer overheated" and that inflation was moderating - but warned it was still too hot and above the Fed's 2% inflation target.
Financials were generally higher, supported by the ultimate pathway to lower rates suggested by Powell and the discussion around the Fed's plans for banks to hold more capital - Goldman Sachs (NYSE:GS) +2%, Morgan Stanley (NYSE:NYSE:MS) +1.9%, Citigroup +2.7% and Bank of America (NYSE:BAC) +2.2%.
Mega cap tech names firmed with Nvidia +1.2%, although Microsoft (NASDAQ:MSFT) fell 1.3%. Energy names lagged, shares in Exxon Mobil (NYSE:XOM), -0.75%, continued to fall having warned lately of lower profits due to a decline in refining margins.
European sharemarkets fell on Tuesday, continuing to retrace last week's improvements.
- The continent-wide FTSEurofirst 300 index slipped 18 points or 0.9%.
- In London, the UK FTSE 100 index fell 53 points or 0.7%.
There were mixed fortunes for European resources and energy names. Participants continue to look ahead to China's Third Plenum next week in the hope that the Chinese Administration will unveil new initiatives that might support resource demand.
Energy names tracked oil prices lower: BP (LON:BP) -4.3%, led European energy names lower after warning of lower earnings, reflecting a broader decline in refining margins - Rio Tinto (ASX:RIO) +0.25%, Anglo American (JO:AGLJ) -1.4% and Glencore (LON:GLEN) -0.6%.
Currencies
Major currencies were weaker against the US dollar in European and US trade as comments from Fed chair Powell that the Fed is still weighing up rate cuts saw the Greenback drift higher.
- The Euro fell from US$1.0830 to US$1.0805 and was near US$1.0814 at the US close.
- The Aussie dollar dipped from US67.48 cents to US67.24 cents and was near US67.40 cents at the US close.
- The Japanese yen fell from 160.74 yen per US dollar to JPY161.52 and was near JPY161.30 at the US close
Commodities
Commodity prices were generally weaker in Northern Hemisphere trade, hampered at the margin by a firmer US dollar.
Global oil prices continued this week's retreat from six-week highs as participants considered the demand implications of US rates remaining 'higher for longer'.
- The Brent crude price fell US$1.09 cents or 1.3% to US$84.66 a barrel.
- The US Nymex crude price fell US$0.92 or 1.1% to US$81.41 a barrel.
Base metal prices were lower on Tuesday.
- Copper futures eased from 1-month highs, down 1%
- Aluminium futures shed 1.5%.
The gold futures price rose US$4.40 or 0.2% to US$2,367.90 ounce on Tuesday. Spot gold was trading near US$2,363 an ounce at the US close
What’s on?
The Reserve Bank of New Zealand announces a decision on interest rates today. The official cash rate (OCR) is expected to remain steady at 5.5%.
In China, Consumer and Producer Inflation figures for June are released.
In the US, Federal Reserve chairman Jerome Powell testifies before The House of Representatives Financial Services Committee.
What’s happening in small caps?
The S&P/ASX Small Ordinaries (XSO) was down 5.6 points or -0.19% to 2,949.4 yesterday.