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FIVE at FIVE AU: ASX as flat as a Myki card; key figures out this week; debt ceiling and stagflation blues

Published 15/05/2023, 03:33 pm
© Reuters FIVE at FIVE AU: ASX as flat as a Myki card; key figures out this week; debt ceiling and stagflation blues
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The S&P/ASX200 is down 0.90 points today to 7,255.80.

Things look fairly even if you assess today’s performance against the last five trading days, but less steady against the 52-week high, against which trade has slipped back 4.12% – just like Melbourne’s broken Myki ticketing system, quipped a colleague at Proactive.

Most sectors are marginally in the green as trade continues, with Real Estate leading the pack, up 0.72%, followed fairly closely by Energy (0.53%), Utilities (51%), Materials (47%) and Health Care (44%).

Not fairing so well are Financials (-0.76%) and Information Technology (-0.47%).

A range of data indicators are on the horizon for the week to help investors read the winds, including the latest figures on the job market and wages.

Economic data out in Australia, US, China

Tomorrow the RBA will release the minutes of its infamous last board meeting, though those looking to divine whether we’re headed for more rate pain are likely to be disappointed – the bank has already released the Statement on Monetary Policy, and it’s as clear as mud what the central bank plans to do next.

Overseas migration data will also be released tomorrow - a sharp lift in population growth is a double-edged sword, being a key factor supporting the economy, but conversely stoking inflation.

Later in the week, the wage price index will be released, which is expected to show that wages rose 0.9% in the March quarter to be up 3.6% on the year, bearing in mind that the RBA has said a target range near 3.5-4.0% is acceptable. Jobs data will follow on Thursday and it is expected that the ranks of the jobless will swell slightly from 3.5% to 3.6%.

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Key Chinese economic data will be released tomorrow, highlighting retail sales, production, investment and jobs activity, while in the US, retail sales, production and housing figures will be released over the next couple of days.

The debt ceiling, stagflation and other woes

OANDA's senior market analyst The Americas Edward Moya had this to say about the week in the US, as a default on the debt ceiling once again hovers as a threat:

“US stocks are softer as banking jitters persist and after a steady dose of reminders of all the risks that remain on the table; Treasury Secretary Yellen reiterated that a default would be ‘an economic and financial catastrophe’, while the Fed’s Bowman warned that they will likely need to raise interest rates further and hold them higher for some time if inflation remains high.

“Today’s US economic data also reminded investors that stagflation risks aren’t going away anytime soon. The University of Michigan sentiment survey showed that long-term inflation expectations jumped to a 12-year high at 3.2%.

"In addition to deteriorating sentiment and current conditions, expectations plunged to the lowest levels since July. The consumer is becoming rather grim and if inflation expectations continue to remain elevated, that could force the Fed to tighten more.

“Given all the resilience from the US economy that we’ve seen so far, it is hard to argue that we are seeing enough weakness in the service sector to justify any chance that inflation will fall to 3.0% anytime soon. Unless the credit crunch gets much worse or the Fed ends up having to deliver more rate hikes, we might see the disinflation process struggle over the next few months.

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“Crude prices are getting punished as the dollar rally extends. Several oil headlines have provided mixed signals for energy traders; Iraq and Canadian supplies have seen some disruptions, while Iraq signals that there will be no additional reduction from OPEC+. Iraq oil minister Hayan Abdel-Ghani also noted that Iraq cannot reduce output further.

“The strong greenback has triggered a modest pullback for gold. The precious metal appears to be facing rather strong support around the $2,000 level, but that could easily be breached if king dollar makes a return next week.

“The institutional world is buying gold again, posting the biggest one-day increase with ETF purchases in almost two months. The institutional world hasn’t been the best bettors on bullion as they were sellers into a good part of the rally that has happened over the last year.

“Gold just needs to survive this dollar rally and it should benefit from steady safe-haven flows as Wall Street worries over geopolitical stress, a debt ceiling impasse, and potentially further regional banking issues.”

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