ASX futures and the Aussie dollar were looking bright this morning, up 0.2% and 0.3% respectively, with the market expected to rise on the coat-tails of a positive day’s trade on Wall Street. As we go to press the market is 0.15% up on yesterday.
US investors had got wind of the minutes of the Federal Open Market Committee’s May meeting, which suggested that rates are set to rise aggressively over the next two months. Indeed, the meeting resulted in a 50-basis-point rise, the biggest single jump in 22 years.
Share price rises for Tesla (4.9%) and Amazon (2.6%) drove the S&P 500 up 0.9% to 3,978. The Nasdaq was up by 1.5% and the Dow gained 0.6%, to 32,120.
The confidence suggests that, between higher rates and a recession, investors are prepared to back rate hikes. It might also suggest that certainty is a good thing – the minutes made the bank’s proposed trajectory and the increments of that trajectory clear.
Construction faces toughest time in half a century
The Australian construction industry is in a state of upheaval following the collapse of two big companies – Condev and Probuild – earlier in the year. Metricon, Australia’s biggest builder, now looks to be in trouble following the sudden death of founder Mario Biasin on Monday.
The industry faces an uphill battle, with COVID-related skilled worker shortages, rising material costs and supply chain issues adding to its woes. The spike in material costs is alarming, with timber up 39% and steel 37%. Add this to blowouts in schedules because of the labour shortage, and things are looking pretty rough.
“The feedback we’re getting is this is the worst experience they’ve had regarding cost and capability challenges ever - and that includes the resources boom,” Adrian Hart, head of construction and infrastructure at BIS Oxford Economics, told 7NEWS.com.au.
“You have to go back to the 1970s oil shock to get an idea of the sort of price increases that we’ve seen in the industry right now.”
Trade winners and losers
Notwithstanding the challenges in the Pacific, including news of a Chinese bid to persuade 10 nations in the region to sign a security pact, there are hopes for renewed dialogue with our largest trading partner.
Halted barley, beef, lobster and wine exports would seem set to gain the most from seemingly thawing relations.
The $136 million live sheep export industry plans to lobby the new government to change its stance on live exports. The ALP took animal welfare concerns to the election and promised to phase out the industry.
But industry representatives are hopeful that they can convince the government that welfare standards have improved since the last ban on live exports in 2011.
Grapes of wrath
Australian wine exports decreased by 26% in cash terms to $2.05 billion and 13% in volume to 628 million litres year-on-year to March 2022, according to Wine Australia.
The figures tell the story of the high deposit tariffs China slapped on bottled Australian wine in November 2020 and are exacerbated by tough global market conditions.
Exports excluding mainland China were brighter, driven by diversification into regional markets including Singapore, Hong Kong, Thailand, South Korea, Taiwan and Japan.
A Wine Australia spokesperson said that while the increase in value excluding mainland China was strong at $129 million, it did not come close to offsetting the decline in value to mainland China – a loss of $844 million.
In other news
Spot gold was down 0.7%, to $US1,85.20 an ounce. All the base metals were down, with tin down the least and lead down the most, according to Commsec. Nickel continued to go its own way and was up 0.9%.
Brent crude was up 0.6%, to reach $US114.29 per barrel, while West Texas crude rose 0.8% to $US110.71 per barrel.
In Europe, the pan-European STOXX 600 index added 0.6%, Germany’s DAX rose 0.6%, and Britain's FTSE gained 0.5%.
The European Central Bank will meet next month to chart its own course through inflationary pressure, with speculation this may include the need for a 50-basis-point hike.