The ASX is expected to rise today, bucking the trend from a weak Wall Street overnight. The US markets were volatile amid continued concerns about a recession.
The Dow ended down 0.2%, the S&P 500 lost 0.1% and the Nasdaq slipped 0.2%.
Comments from Federal Reserve chair Jerome Powell, who admitted that an economic “soft landing” would be challenging, did little to quell these fears.
Fed warned not to drive economy “off a cliff”
During a Senate Committee hearing, progressive senator Elizabeth Warren challenged Powell:
“You know what’s worse than high inflation and low unemployment? It’s high inflation with a recession and millions of people out of work,” Warren said. “I hope you consider that before you drive this economy off a cliff.”
The ASX has considerable ground to make up following the worst trading week since the early days of COVID and is still in correction territory.
The Aussie dollar was flat, at 69.2 US cents, slipping 0.7% overnight and down considerably from its April peak of 76.6 US cents.
It fell by an even steeper 1% against the Euro and the yen, buying 65.5 Euro cents and 94.3 yen.
Biden asks for a holiday
President Biden has called on Congress to deliver a three-month ‘fuel-tax holiday’ by suspending federal gas (currently 18.4 cents per gallon) and diesel taxes through to September.
The temporary move – similar to our own six-month easing of the fuel excise – would give relief to American consumers struggling with rising prices, he said. Biden also called on states to suspend their own fuel taxes.
But colleagues on the hill are expected to vote the proposal down, viewing it as a band-aid solution to a much bigger problem.
Fuel holidays have been viewed with scepticism on both sides of the house, with Barack Obama shunning the idea of a fuel-tax holiday back in 2008.
At any rate, talking about it might have helped – global oil prices fell by as much as 3% on Wednesday. Brent crude fell by US$2.91 or 2.5% to US$111.74 a barrel, while US Nymex crude fell by US$3.33 or 3.0% to US$106.19 a barrel.
Yet another economy sees record inflation
In the UK, headline inflation reached a 40-year high, according to new data from the Office for National Statistics released on Wednesday. The office said the figures “would last have been higher around 1982, where estimates range from nearly 11% in January down to approximately 6.5% in December.”
The 9.1% surge in the consumer price index (CPI) is the steepest rise in the G7 group of nations, and is the result of surging housing, fuel and grocery prices.
But the pain won’t stop there - expectations are growing for inflation in that country to reach 11% by the end of the year.
The Bank of England last week raised interest rates for the fifth consecutive month, though the increments are softer than we’ve seen in the US.
ACTU reacts to wages comments
ACTU leader Sally McManus this morning reacted to RBA governor Dr Phillip Lowe’s remarks this week that wage rises should remain at 3.5% – lower than current inflation levels – by calling his warnings of a 1970s-style wage-price spiral a “total boomer fantasy”.
McManus argued that Lowe’s point was moot, given that wages had not moved by 3.5%, let alone 5 or 7%, and that wages were not the threat to the economy.
“That board doesn’t have anyone there who participates in negotiations for wages or the wage-setting system from the workers’ side,” she told Radio National Breakfast.
“And that’s a pretty big problem if you’re … making assumptions or trying to analyse how things work.”
Wine Australia closes office in China
In yet another sign of the flagging relationship, but one we have seen coming for a while, Wine Australia closed its only physical office in China, where it once enjoyed a $1.2 billion-a-year trade relationship.
That market has now slumped to just over A$200 million at the end of March.