ASX Futures (SPI 200) imply the ASX 200 will open 1 point higher, up 0.01%.
Wall Street was closed for the Fourth of July public holiday, major European indices rallied - headlined by oil and gas stocks, iron ore continues to tank and the RBA is expected to deliver another interest rate hike at 2:30 pm AEST.
Let’s dive in.
Mon 04 Jul 22, 10:33pm (AEST)
|US 10 Yr T-bond||2.889||-2.79%|
The US market was closed on Monday in observance of Independence Day. We will reluctantly turn to the next best alternative: European markets.
Most European sectors traded in positive territory. Energy stocks outperformed while the tech sector fell short of benchmarks.
Regional Stoxx 600 +0.5%
London’s FTSE 100 +0.9%
German DAX -0.31%
France's CAC 40 +0.4%
Harbour Energy, Shell and BP all rose 4-5% amid a broad-based rally for energy stocks
Uniper (-27%) shares tanked after reports that the German government is considering a state bailout of the utilities company. Uniper is struggling due to reduced Russian gas imports
Strategists at Liberum said economic data indicates a -25% drop in earnings per share over the next 12 months for European companies, Reuters reported
Eurozone inflation hit a record 8.6% year-on-year in June
Up from 8.1% in April and above economist estimates of 8.4%
France and Spain experienced much higher inflation in June
German inflation declined, but largely due to new government energy subsidies
Stagflation risks in the EU remain very real
Eurozone producer prices rose 0.7% month-on-month in May
Producer prices are up 36.3% compared to a year ago
Slightly below economist expectations of 36.9%
Germany recorded its first trade deficit in more than 30 years, at -1bn euros
Exports were down -0.5% month-on-month contributing to the deficit
Germany’s dominant manufacturing position was hit by supply chain related disruptions caused by the Russia-Ukraine war, pandemic and Chinese lockdowns
Prices for imports such as energy, food and industrial components have surged by more than 30%
Swiss inflation hit a 29-year high of 3.4% year-on-year
The last time Swiss inflation was above 3% was in 2008
US Atlanta Fed’s ‘GDP Now’ forecast slid to an annualised -2.1% in the second quarter
Implies the US is already in a technical recession (2 consecutive quarters of negative GDP growth)
Iron ore prices continue to slide amid limited demand from steelmakers and downbeat market sentiment, sources told Fastmarkets
Oil continues to bounce on data showing lower output from OPEC members, unrest in Libya, sanctions on Russia and an oil and gas strike in Norway
Gold remains largely unchanged around US$1,805 ahead of the Fed’s June meeting on Thursday
The S&P/ASX 200 is expected to open flat on Tuesday as the market braces itself for higher interest rates.
Consensus expects the RBA to deliver a 50 bps hike to bring the cash rate to 1.35%.
A 25 or 75 bp hike is possible, but highly unlikely.
The RBA has delivered two larger-than-expected interest rate hikes this year.
May: 25 bps to 0.35% (vs. estimates of 15 bps)
June: 50 bps to 0.85% (vs. estimates of 25 bps)
Both times, the ASX 200 sold off sharply.
75 bps is unlikely, but still possible. Recent solid economic data could embolden the RBA and suggest to them that the Australian economy can stomach higher interest rates.
Retail spending rose for a fifth consecutive month in May, job ads are abundant, manufacturing PMIs are steady and unemployment is sitting at all-time lows of 3.9%.
ASX corporate actions occurring today:
Ex-dividend: ALG, CAM, EDC
Dividends paid: CIM, IPL, NAB
Issued shares: 8IH, AHX, AIM, AIS, ALQ, AMA, AON, ATV, BRG, C29, CAE, CAT, CCG, CD1, CD2, CNI, ELO, EM2, EMH, EOS, FLX, FWD, INR, JLG, KAT, LIT, LKY, MCP, MGF, MGU, MND, MQG, MSV, NAB, NBI, NIS, NSX, NTU, OIL
Other things of interest (AEST):
Australia Retail Sales (May) at 11:30 am
China Caixin Services PMI (June) at 11:45 am
RBA Interest Rate Decision at 2:30 pm
Finance Writer & Social Media
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