Australian shares are set for a marginal increase this morning, with futures showing a slight uptick following a mixed session on Wall Street.
Rate cut talk premature
Yesterday RBA governor Michele Bullock shook the markets somewhat with a speech in which she said that talk of rate cuts is "premature" – going as far as to say that more interest rates might be on the cards to tame continuing inflation.
She refused to be drawn on the federal treasurer’s remarks earlier this week that high interest rates were damaging the economy.
At 11:30 AM AEST, the Australian Bureau of Statistics (ABS) is set to release its monthly home lending data, which is expected to reveal a 1.3% rise in loan commitments for August, according to forecasts by the ANZ.
This follows a similar 1.3% rise in the previous month.
Loan commitments have been on an upward trajectory since February, when they dipped amid higher interest rates, pointing to a steady recovery in both investor and owner-occupier markets.
Mixed day of US trade
In the US overnight there were mixed results. The tech-heavy Nasdaq rose by 0.3%, buoyed by a 4.9% gain in Tesla’s stock after the electric vehicle giant announced plans to launch its full self-driving software in Europe and China, pending regulatory approval.
Conversely, the Dow Jones fell by 0.5%, while the S&P 500 dropped 0.3%.
US economic data betrayed conflicting signals, with a weaker-than-expected rise in private payrolls and a decline in weekly unemployment claims.
This has raised questions about the health of the US labour market ahead of the critical non-farm payrolls report, which could heavily influence future Federal Reserve interest rate decisions.
The non-farm payrolls data is a key measure of the nation’s labour market excluding farm workers, federal employees, private household staff and non-profits. This data is closely watched as it offers one of the best insights into economic health.
The Commonwealth Bank of Australia (CBA) noted that tonight’s report will be critical in shaping the Federal Reserve’s September rate cut decision.
Economists expect 165,000 jobs to have been added in August, with unemployment ticking down to 4.2%.
Meeting these estimates would support a 25-basis point rate cut, while weaker results could prompt a 50-basis point cut, potentially weakening the US dollar. Stay tuned.
Meanwhile, European share markets also dipped, with the FTSEurofirst 300 index down 0.6%, reflecting concerns over global economic growth.
European car giant Volvo has backed away from an earlier pledge to go all electric by 2030, saying it still expects to be offering some hybrid models in its line-up at that time.
The company sheeted home the changes to market conditions and customer demands.
Currencies and commodities
The Australian dollar showed resilience in overnight trade, rising from US$0.6713 to a session high of US$0.6740, closing near US$0.6735.
The currency gained strength despite mixed economic signals out of the US. Meanwhile, the Euro weakened, falling from US$1.1119 to US$1.1076, stabilising at around US$1.1110 by the end of the US session.
The Japanese yen also slid, moving from JPY142.86 to JPY144.20 against the US dollar before settling at JPY143.40.
In commodities, oil prices remained relatively stable despite ongoing concerns about demand in the US and China, coupled with an anticipated increase in supply from Libya.
Brent crude was down just US$0.01, trading at US$72.69 a barrel, while US Nymex crude prices fell by US$0.05 to US$69.15 a barrel.
Base metals saw varied performance, with copper futures up 1.4%, driven by China’s announcement of major investments in power networks in Africa.
But aluminium prices edged down by 1%, reflecting market volatility and concerns about global growth.
In the precious metals sector, gold remained flat as market participants awaited further US labour market data, which could impact the Federal Reserve’s interest rate stance.