Pre-Open Data
Key Data for the Week
- Wednesday – AUS – Wage Price Index rose by 0.7% over the March quarter, which represented annual growth of 2.4%.
- Wednesday – UK – Consumer Price Index increased by 9.0% in the 12 months to April, up from 7.0% in March.
- Thursday – AUS – Unemployment Rate
Australian Market
The Australian sharemarket gained ground on Wednesday, up 1.0%, driven higher by the Materials (2.5%) sector. BHP (3.2%), Fortescue Metals Group (2.0%) and Rio Tinto (2.1%) all advanced, after the price of iron ore jumped 2.2% on Tuesday night.
In economic news, weaker than expected wages growth data was interpreted by some investors to mean a reduction in the likelihood of an aggressive rate hike by the Reserve Bank of Australia in June, which seemed to support the session’s strong performance.
By the close of trade, 9 out of 11 sectors were in the green, the main detractor being the Consumer Staples (-1.0%) sector, which was weighed down by supermarket giants Woolworths (-1.1%) and Coles (-1.4%). Meanwhile, the Information Technology sector recovered from recent weakness, ahead 1.9%, led by Megaport (4.1%), Block (3.2%) and Xero (2.3%).
Other notable performers in yesterday’s session included Paladin Energy (5.2%), Flight Centre (4.7%) and Seven Group Holdings (4.5%).
The Australian futures market points to a 1.79% decline today, following a weak lead from international markets overnight.
Overseas Markets
European sharemarkets weakened on Wednesday, after concerns around inflation were reignited by the strongest UK Consumer Price Index data seen in 40 years. Unsurprisingly, the Information Technology sector fared the worst, broadly down 2.7%, alongside the Materials sector, which lost 1.2%. By the close of trade, the STOXX Europe 600 and UK FTSE 100 both fell 1.1%, while the German DAX gave up 1.3%.
US sharemarkets sank on Wednesday, as the brief rally in growth related stocks faded amid economic concerns around inflation. Retail heavyweight Target reinforced inflation anxiety, after it reported 1Q 2022 profit had halved due to higher fuel and freight costs. The company’s share price fell 24.9%, its largest fall since 1987. Meanwhile, Walmart reduced its profit forecast on Tuesday and lost 11.4%, before its share price fell a further 6.8% yesterday. By the close of trade all sectors were in the red, led by Consumer Discretionary (-6.6%), Consumer Staples (-6.4%) and Information Technology (-4.7%). The Dow Jones conceded 3.6%, the S&P 500 fell 4.0% and the NASDAQ lost 4.7%.
CNIS Perspective
Wages growth is a key factor in the inflation story, so it was a relief that the March quarter Wage Price Index (WPI) rose by 0.7%, rather than the expected 0.8%.
In annual terms the WPI has risen 2.4%, which is the fastest pace since the December quarter of 2014.
Interestingly, wages growth rose less than inflation, meaning households have experienced a reduction in purchasing power. Real wages fell 2.6% over the year to the March quarter of 2022, which is the largest fall since September quarter of 2000, following the introduction of the GST.
While the RBA has stressed the importance of getting “back to business as usual”, yesterday’s softer wages growth data may slow the pace of interest rate normalisation back to 0.25% at next month’s meeting, down from 0.40%, which was widely expected.
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