Australians will go to the polls on Saturday to vote for whomever they believe can best lead the country over the next three years.
Whichever outfit wins, it will have to deal with major economic issues including inflation, rising interest rates, stagnant wage growth and productivity.
Treasurer Josh Frydenberg recently commissioned a review of Australian productivity, with the final report by the Productivity Commission due next February.
Alan Kohler wrote in The New Daily this morning, “The PC’s report will provide the Prime Minister and federal cabinet with a set of boxes; all they will have to do is tick them.
“Not that there is any mystery about what’s required: Reduce child care costs, improve education outcomes, fix health care and aged care, reform the tax system, improve transport infrastructure, build a lot more social housing and take steps to improve housing affordability, create a national integrity commission to stop corruption and misuse of public money and, last but not least, put a price on carbon to sharpen the incentives for decarbonisation.
“Every economist in Treasury and economic adviser in Parliament House knows all that, and there’s a library of reports and studies into productivity for what they’ve forgotten, but a Productivity Commission blueprint might focus the collective political mind and provide some cover for tough decisions.
“As Frydenberg wrote in the terms of reference, ‘productivity growth is vital for Australia’s future’, but you wouldn’t know it watching the election campaign.
“The topic has been conspicuously absent from a campaign in which both sides seem to be working overtime to avoid any discussion of difficult reform or productivity, although they have been having half a debate about wages and inflation.”
Whatever happens on the weekend, the new government will have a lot of work to do to win back the confidence of the Australian people in politics and their representative politicians.
On a personal note, I have already voted and will not be attending a polling booth as the thought of having blue, red, green and yellow (looking at you United Australia Party and your relentless spam) pamphlets shoved in my face by rusted on party zealots doesn’t make election day appealing. That harassment certainly isn’t worth the democracy sausage and should be illegal.
The US market
US stocks finished higher Friday, however, the Dow ended lower for the seventh week in a row as investors continue to fret about the Federal Reserve's ability curb high inflation and the potential for a recession.
Dow Jones Industrial Average gained about 465 points Friday, or 1.5%, ending near 32,196. The S&P 500 index was up 2.4%, after coming close to entering bear-market territory on Thursday. The Nasdaq Composite Index jumped 3.8%, which wasn't enough to erase sharp earlier losses.
The Dow ended the week 2.1% lower for a seventh week in a row, tallying its sharpest 7-week percentage point plunge since April 24, 2020, according to Dow Jones Market Data.
The S&P 500 lost 2.4% for the week and the Nasdaq shed 2.8% since Monday.
Australian markets
In Australia, the ASX was also higher and is expected to continue that trend today.
The ASX 200 recovered all of Thursday’s losses with a 1.9% rebound to close at 7,075.1, but like the US markets, it wasn’t enough to prevent it finishing in the red for a fourth week in a row. Every sector closed in positive territory Friday.
Consumer staples was the only sector not to post a gain of at least 1%, while the tech sector led the rebound with a 7% rise.
Best and worst performing sectors
All sectors were down again with the best performing sectors being Healthcare down under 1%, followed by Consumer Staples down just over 2% and Financials and Utilities, both down around 2.5%. The worst performing sectors were Information Technology down heavily, falling over 12% followed by Materials over 5% lower and Energy down over 3%.
The best performers in the S&P/ASX top 100 stocks included Domino’s Pizza Enterprises Ltd up over 4%. According to Wealth Within chief analyst Dale Gillham, “speculators are attempting to buy this stock at a better price given it was down over 12% last week and over 40% for the year.
Orica Ltd (ASX:ORI) was also up more than 3% while Suncorp Group Ltd is up over 2%. The worst-performing stocks were Block Inc (NYSE:SQ) down more than 20% followed by Altium Limited (ASX:ALU) down over 17% and Magellan Financial Group Ltd (ASX:MFG) down over 14%.
What's next for Australian stock market?
According to Gillham, “The Australian stock market has continued to be volatile and was down around 4% for the week, which is a large move on our market. While stocks in the top 20 are falling, the bigger falls are coming from the bottom end of the market, as we are seeing a washout of new investors in these cheap stocks.
“This month both the Emerging Companies and Small Ordinaries Indices are down over 13 and 10% respectively, as investors are fearful of a crash. We need to remember that following the COVID crash, we had the biggest influx of new investors in our market, especially young investors using apps that gamify the stock market and the current bearishness is their first taste of market volatility.
“Right now, PE ratios are not indicating that the current fall can be sustained or that we will experience a crash. Regular readers will remember a few months ago that I indicated if our market fell, it could fall up to 15% and in January it fell almost 12% while the recent the fall is around 10%.
“So how much further will the market fall? While anything is possible, as I have mentioned in the past, I believe most of the fall has already occurred although it is still possible for the All Ordinaries Index to fall below 7,000 points and possibly to around 6,800 points.
“That said, I believe that there are some great buying opportunities coming up, especially in the larger stocks on our market, so get ready to jump into these stocks as they rise into mid-year and beyond.”
Currencies and commodities
Here’s what we saw overall (source Commsec):
- The Euro fell from highs near US$1.0417 to lows near US$1.0354 and was near US$1.0410 at the US close.
- The Aussie dollar rose from lows near US68.65 cents to session highs near US69.40 cents at the US close.
- The Japanese yen eased from 128.50 yen per US dollar to JPY129.43 and was near JPY129.20 at the US close.
- Global oil prices jumped 4% on Friday. US gasoline prices surged to a record high, China appeared ready to ease pandemic restrictions and investors worried supplies will tighten if the EU bans Russian oil.
- The Brent crude price rose by US$4.10 or 3.8% to US$111.55 a barrel.
- The US Nymex crude price added US$4.36 or 4.1% to US$110.49 a barrel. Over the week, Brent lost US84 cents or 0.7%, but the Nymex added US72 cents or 0.7%.
- Base metal prices were mixed on Friday. Aluminium rose by 1.8% on shrinking inventories, but nickel shed 2%. Other base metals wavered in a week dominated by growing concerns about global economic growth. For the week, tin dropped by 15.1%.
- The gold futures price fell by US$16.40 or 0.9% to US$1,808.20 an ounce. Spot gold was trading near US$1,811 an ounce at the US close. Over the week, the gold price fell by US$74.60 or 4%.
- The iron ore futures price rose by US77 cents or 0.6% to US$130.93 a tonne. For the week, iron ore lost US$7.51 or 5.4%.
In Europe
The pan-European STOXX 600 index rose by 2.1% with travel and leisure stocks up by 4.8%.
The STOXX 600 snapped a four-week losing streak, lifting 0.8%.
On Friday, the German Dax index added 2.1% and the UK FTSE index jumped 2.6%.
In London trade, shares in Rio Tinto rose by 2.2% and BHP shares added 2.4%.