Pre-Open Data
Key Data for the Week
- Thursday – AUS – Unemployment Rate fell sharply to 3.5% in June, from 3.9% in May, which represented the lowest rate since 1974.
- Friday – CHINA – Gross Domestic Product
- Friday – US – Retail Sales
Australian Market
The Australian sharemarket kept momentum on Thursday, as the blue chip index added 0.4%, led higher by the Information Technology (2.1%) and Energy (1.7%) sectors. Key contributors included Computershare (2.7%) and Xero (2.0%), alongside coal miners Yancoal (10.3%) and Whitehaven Coal (6.5%).
The Materials sector also performed well, up 1.6%, supported by a slight rebound in the price of iron ore. Sector heavyweights BHP (1.3%), Fortescue Metals Group (2.5%) and Rio Tinto (2.0%) all advanced. Mineral Resources was another notable performer, as it jumped 5.7%.
The session’s primary detractors came from the Financials and REITs sectors, which broadly lost 0.8% and 1.2% respectively. All four major banks closed lower, led by ANZ (-2.2%), followed by Commonwealth Bank (-1.5%), Westpac (-1.1%) and NAB (-0.5%).
In company news, Bega Cheese fell 8.2%, to be the worst performer in the ASX 200, after it warned investors that higher milk costs would impact FY2023’s earnings. Meanwhile, Telstra completed its government endorsed acquisition of Digicel Pacific. The move has arguably worsened the political relationship between Australia and China, as it became clear the motivation behind the acquisition was to prevent any potential Chinese espionage.
The Australian futures market points to a 0.80% decline today, on weakness from international sharemarkets overnight.
Overseas Markets
European sharemarkets tumbled on Thursday, after the European Commission cut its economic growth forecasts, and revised up its inflation estimates for the Eurozone over the next two years. This seemed to stoke recession fears in the minds of investors, as the more cyclical Banks and Basic Resources sectors were key detractors, down 3.1% and 3.8% respectively. By the close of trade, the STOXX Europe 600, German DAX and the UK FTSE 100 all conceded between 1.5%-1.9%.
US sharemarkets were mostly lower on Thursday, after worse than expected earnings results dampened investor sentiment. Notable reporters included JPMorgan Chase (-3.5%) and Morgan Stanley (-0.4%), which both declined after they posted a slump in quarterly profits and warned of economic slowdown in the US. JPMorgan Chase even went so far as to suspend its share buybacks. This news led the Financials sector lower, down 1.9%, to be the greatest detractor in the session. On the other hand, the Information Technology sector was the main contributor, up 0.9%, pushed higher by Apple (2.1%), NVIDIA (1.4%) and Visa (0.9%). By the close of trade, the S&P 500 and Dow Jones shed 0.3% and 0.5% respectively, while the NASDAQ was relatively flat.
CNIS Perspective
The Australian unemployment rate fell to its lowest level since August 1974 yesterday, to 3.5%.
The fall was much larger than expected, especially given the participation rate reached a record high of 66.8%.
At 3.5% the unemployment rate is well and truly at ‘full employment’. At this low level, wages pressures are expected to build more rapidly as the pool of available labour to meet the surging demand for workers is at a generational low.
With another 0.5% increase to the Official Cash Rate (OCR) all but guaranteed next month, yesterday’s exceptionally strong unemployment data, together with a higher inflation reading expected 27 July, the RBA’s manoeuvring of the OCR may be the most important and most significant we have seen to date.
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