Pre-Open Data
Key Data for the Week
- Wednesday – EUR – Consumer Price Index – Inflation was 2.2% in the year to July.
- Wednesday – AUS – Wage Price Index – Wages grew 0.4% in the quarter, to total 1.7% for the year.
- Thursday – AUS – Unemployment Rate
- Thursday – US – Initial Jobless Claim
Australian Market
The Australian sharemarket shed 0.1% yesterday, dragged down by the Materials sector, which fell 3.0%. This came as commodity prices continue to weaken, with iron ore, copper and aluminum down 4.0%, 2.2% and 1.7%, respectively.
Index heavyweight BHP pulled the market down, as it declined 7.1%, representing the company’s worst one-day loss since the lows experienced in early 2020. It continued to fall as investors digest news that BHP and Woodside Petroleum are set to merge their respective oil and gas portfolios, with shareholders having a 48:52 (BHP:WPL) interest. Woodside Petroleum also fell 2.1%, dragging the Energy Sector down 0.5%.
The Real Estate sector was the top performer on Wednesday, as it climbed ahead 1.8%. Asset manager of large format retail centres, Aventus Group (3.5%), led the sector after it reported strong FY21 earnings, outperforming estimates. Dexus, the office and industrial property manager, was another top performer, up 1.8%.
The Financials sector rebounded slightly yesterday, gaining 0.7%, as most major banks edged ahead. Westpac was the leader, up 1.4%, while Commonwealth Bank, ANZ and NAB all rose between 0.2%-0.8%.
The Australian futures point to a 0.66% decline today.
Overseas Markets
European sharemarkets were steady on Wednesday, as the German DAX rose 0.3%, while the UK FTSE 100 trimmed 0.2%. Meanwhile, the STOXX Europe 600 crept up 0.1%. European investors seemed to favor defensive Utilities and Healthcare stocks, over more cyclical sectors, amid concern over a spike in global COVID-19 cases.
US sharemarkets declined overnight, as the S&P 500, Dow Jones and NASDAQ all conceded ~1.0%. Energy, Healthcare and Technology were among the worst performing sectors, as they fell 2.4%, 1.5% and 1.4% respectively. Consumer Discretionary was the only sector to close ahead, up 0.2%.
Key losers included Technology stocks NVIDIA (2.2%), Apple (2.6%) and Fortinet (2.0%).
CNIS Perspective
After years of massive amounts of stimulus and falling unemployment, the economic textbook suggests inflation should have already started to make its presence felt and interest rates should be rising as a result.
However, the correlation between low wages growth and low inflation, which has developed over the past decade or so, continues to hold true and it seems yesterday’s soft wages data will once again foreshadow low inflation.
Wages growth in the June quarter remained subdued, rising just 0.4% and producing an annual growth rate of 1.7% over the year to June.
The RBA has emphasised that unemployment and spare capacity in the labour market will need to reduce further before a meaningful increase in wages will be seen and subsequently drive inflation back within the RBA’s inflation band of 2-3%.
Yesterday’s data suggests inflation is still some time away, even after years of massive economic stimulus.
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