The ASX is expected to slip ahead of this evening’s Federal Budget.
ASX 200 futures were down just 4 points to 7267 after the US session ended.
Here’s what we saw (source Commsec):
European markets
Europe’s markets finished higher on Monday led by Health care, travel & leisure and banks stocks which rose by 0.8%, leading sectoral gains.
Data showed that German industrial production fell by 3.4% in March (survey: -1.5%), increasing recession fears in Europe's largest economy.
The continent-wide FTSEurofirst 300 rose by 0.4%. The London Stock Exchange was closed for the UK Bank Holiday for the coronation of King Charles III.
US markets
Things were mixed in the US ahead of pivotal inflation readings later this week. Investors also weighed the US Federal Reserve's policy direction after a survey of loan demand showed signs of credit tightening.
Stocks struggled for direction following disappointing earnings results. Shares of Catalent tumbled 25.7% as the contract drug manufacturer saw lower revenue and core profit in 2023. Tyson Foods (NYSE:NYSE:TSN) shares fell by 16.4% on a surprise second-quarter loss and a cut in its annual revenue forecast. Shares of PacWest Bancorp rose by 3.7% after surging by around 30% earlier in the session. The regional lender cut its quarterly dividend to boost capital, but the KBW regional banking index still fell by 2.8%. Shares of Walt Disney (NYSE:DIS) rose by 2.4% ahead of the company's quarterly results on Wednesday.
The Dow Jones index fell by 56 points or 0.2%. But the S&P 500 index rose by 0.1% with the Nasdaq index up by 21.5 points or 0.2%.
Currencies
- The Euro fell from US$1.1052 to US$1.0998 and was near US$1.1005 at the US close.
- The Aussie dollar lifted from US67.73 cents to US68.02 cents and was near US67.80 cents at the US close.
- The Japanese yen fell from 134.65 yen per US dollar to JPY135.20 and was near JPY135.10 at the US close
Commodities
Global oil prices rose by over 2% on Monday on Canadian supply concerns. Alberta declared a state of emergency in response to wildfires that have prompted energy producers to shut in at least 185,000 barrels of oil equivalent per day, about 2% of Canada's output.
- The Brent crude price rose by US$1.71 or 2.3% to US$77.01 a barrel.
- The US Nymex crude oil price added US$1.82 or 2.6% to US$73.16 a barrel.
- Base metal prices were mixed on Monday. Copper futures gained 1.2% as low inventory levels provided a cushion after prices fell for three straight weeks due to weaker-than-expected demand in China.
- Aluminium futures fell by 0.7%.
- The gold futures price lifted by US$8.40 or 0.4% to US$2,033.20 an ounce.
- Spot gold was trading near US$2,021 an ounce at the US close.
- Iron ore futures rose by US$3.85 or 3.7% to US$107.40 a tonne.
Budget surplus to pay down debt
We’ll have a full wrap of the budget tomorrow morning, but as we know we are expecting a small surplus which Prime Minister Anthony Albanese says will be sued to pay down debt.
“We’ve got to pay down debt,” the Prime Minister told ABC Radio Sydney on Tuesday. "We, of course, haven't confirmed what's in the budget … But we inherited a trillion dollars of debt and what that means is that the interest rate bill goes up in paying.”
Both Albanese and Treasurer Jim Chalmers have referred to the budget as “responsible”.
"That means trying to create space for the investments that we need to drive the economy and productivity and the support to vulnerable Australians while making sure that we're very prudent."
IG Markets analyst Tony Sycamore noted the significant turnaround in finances.
“Specifically, a small budget surplus is expected to be announced in the vicinity of A$3 billion vs a deficit of -A$36.9 billion projected in the October budget. A significant turnaround compared to the Coalition's pre-election budget of -A$78 billion forecast in March last year.
“The stunning fiscal turnaround was driven by surging tax revenues from high commodity prices, a tight labour market lifting tax payments and reducing welfare payments and firmer-than-expected immigration.
“Cost of living pressures from high inflation and sharply higher interest rates will mean the government uses part of its budget windfall to relieve vulnerable households via energy and rental relief. Health will receive additional support and may include a lift in the rebate for a GP visit.
“There will also be a focus on growing the economy and policies to ensure the Australian economy is better placed to weather international shocks. There will also be incentives for businesses to Go Green and to invest in energy efficiency.
“The "Lucky Country's" improved fiscal position will carry into next year FY24 with a significantly smaller deficit of -$A22 billion expected vs the -$44 billion forecast in the October budget.”
CBA profit
The Commonwealth Bank of Australia’s quarterly profit has jumped to $2.6 billion. Its quarterly cash profit rose 8% helped by volume growth and higher non-interest income, however like the other majors it warned of loan losses as customers dealt with rising cost of living pressures.
“Many of our customers are feeling the strain of higher interest rates and the rising cost of living. As higher interest rates impact the Australian economy in the period ahead, we expect economic growth to continue to moderate,” Chief executive Matt Comyn said in a statement to the ASX.
“Despite the challenging global economic outlook, Australia is relatively well positioned given the strength of our banking system, the economic tailwinds from a recovery in population growth and relatively high commodity prices.”
However, the bank expects arrears to rise.
“We expect to see further increases in arrears rates as the full effects of interest rate increases are borne by borrowers in the months ahead,” CBA said.
Cash profit was 1% higher than the quarterly average of profits in its second half ending December 31, while its loan loss rate edged up to 0.10% of all customer loans, from a gain of 0.02% in the same quarter last year.
Comyn said the economy is set to slow.
“As higher interest rates impact the Australian economy in the period ahead, we expect economic growth to continue to moderate.
“Despite the challenging global economic outlook, Australia is relatively well positioned given the strength of our banking system, the economic tailwinds from a recovery in population growth and relatively high commodity prices.”