Josh Gilbert, market analyst at eToro, shares his three things to watch in Australia in the coming days.
AU consumer confidence
In August, Westpac Consumer Sentiment increased by 2.8%, surpassing market estimates of a 0.5% rise. With rates continuing to remain steady and fears of another hike subsiding, Consumer Confidence reached a six-month high of 85.0, marking the highest reading since February.
On Tuesday, we’ll get to see if Australians are continuing to spend despite persistent cost of living pressures, with July’s retail trade data indicating a relatively unchanged turnover estimate of 0.0%.
However, the recent Q2 GDP data indicated that the Australian economy only grew by 0.2% for the June quarter, a poor performance that was blamed on a fall in household spending coupled with government spending, something which may affect Tuesday’s sentiment results.
With tax cuts and cost-of-living relief measures, such as the $300 energy bill relief for every household, potentially boosting the disposable income of many Aussies, there is a belief that these relief measures will encourage consumer spending.
This may lead to stronger consumer confidence levels in the months to come and into 2025, especially with additional cost of living support in the form of rental assistance and Centrelink payment increases coming into play from this month.
Global inflation (US & China)
China and the US are set to release their monthly CPI data on Monday and Wednesday, respectively.
China’s YoY inflation rate is expected to increase slightly, even as both local industry and its export markets continue to struggle.
Export growth has been a key concern in the region, which seems to have led to a loosening of some of the trade restrictions the superpower imposed on Australia in 2020. China’s automotive export industry, one of the strongest cards in its hand, may also be facing a difficult road ahead as electric vehicle sales seem to be dropping in key markets.
The deflationary pressures are undeniable and China CPI data from previous months has come in well below forecasts. Domestic demand is also struggling and once again, the pressure is on for the government to do more to inspire greater domestic spending and stoke the nation’s flailing property market.
Meanwhile, in the US, a September rate cut is basically assured, and it’s expected that August’s CPI data will reflect ongoing deflation. The Fed’s confidence in its tightening cycle seems to have been justified as inflation crawls back to the 2% annual goal.
As is the case here and in the UK, there are concerns in the US that an unexpected jump in unemployment could now trigger a recession, especially given the sudden reduction of roles across the education and construction sectors – but it remains to be seen how alarmed markets should be at that prospect just yet.
AI in Australia
Markets went wild after last week’s announcement that US investment management company Blackstone (NYSE:BX) had agreed to acquire Australian data centre specialist AirTrunk for $24 billion.
The monumental agreement has injected fresh energy into Australia’s tech and innovation space, particularly in data centres and AI, where AirTrunk has been investing a significant proportion of its attention.
Although Australia isn’t well known for tech stocks, there are a few AI stocks in Australia that investors can look to. These include companies NextDC, Megaport and Goodman Group (ASX:GMG), to name just a few.
NextDC is increasingly involved in supporting AI workloads and providing the high-performance infrastructure needed for AI applications as the technology revolution continues to boom. Megaport offers a platform that allows businesses to connect their IT infrastructure to various cloud service providers, data centres, and other networks around the world.
What’s clear is that the demand for AI is not slowing down. There is a trillion-dollar opportunity for businesses across the globe. AI will drive companies' bottom lines through more efficient processes or increased spending on the technology. Meta, Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) are all growing their capital expenditures and directing that capital to AI, therefore, the opportunity for businesses involved with AI remains high.