ASX futures were up this morning by 32 points or 0.47% to 6,910 near 7am, after Wall Street regained its mojo and broke a two-day losing streak.
The Dow added 1.3%, the S&P 500 gained 1.6% and the Nasdaq rose 2.6%, its highest level since early May.
The Aussie dollar was trading at 69.5 US cents, rising 0.5 cents overnight, and spot gold rose 0.2%, to US$1,763.10 an ounce.
Bottlenecks easing
Big-name US stocks across the tech, healthcare and consumer sectors – including PayPal, Gilead Science, Starbucks and eBay – were buoyant and service activity data from all the big economies was stronger than expected, perhaps indicating that some stability is returning.
US factory orders were up, with the June factory order data rising 2%, while the prior month was upwardly revised to 1.8%. Expectations will now build for an improvement with another reading of second-quarter GDP due.
But there is scepticism about the optimism, as seems to be the case these days.
Market Index reports San Francisco Fed President Mary Daly as saying that the markets were getting ahead of themselves on potential rate cuts in 2023, while Minneapolis Fed President Neel Kashkari was reported to have said, “I’m unsure what the markets are looking at”.
Oil bucks the trend
While other commodities received a boost, oil slumped overnight, after recently crossing the $100 threshold. Brent crude was trading at US$97.10 a barrel, down 3.4%, as trade closed.
The drop follows an agreement by OPEC+ oil producers, including Russia and Saudi Arabia, to lift the output target by 100,000 barrels per day.
“That increase is rather small in historical terms – in fact, the smallest production increase in decades – it was enough to weigh prices down after the US Energy Information Administration (EIA) reported a surprise 4.47-million-barrel build for the week ending July 29,” IG analyst Thomas Westwater said.
“That was well above the expected 629,000 barrel draw. US gasoline stocks increase as well, hinting that summer driving demand may have passed its peak.”
The industry, along with many other sectors, is preparing for a slowdown and prices reflect the conflicting concerns of constricted supply and softening demand.
In further signs of a US slowdown, CNN reports that Walmart is laying off 200 corporate employees, just days after the country’s largest retailer issued a profit warning, cutting its profit outlook for the remainder of the year and citing food and fuel costs impacting discretionary spend.
Kohler stays positive
Respected business analyst Alan Kohler is confident that interest rates will stay shy of 3%, with rate cuts on the horizon before long.
'This time next year the RBA will be cutting interest rates,' he recently tweeted, reasoning that inflation has peaked following event-driven pressures such as the NSW floods impacting food production and the Russian invasion of Ukraine constricting fuel supplies.
Kohler argues that the annual Consumer Price Index figure disguised a drop in quarterly inflation in Australia, from 2.1% in March to 1.8% in June.
In other news
The Albanese government’s carbon reduction target has passed the lower house of Parliament after the Greens signalled they would support legislating the 43% target as a floor, not a ceiling.
Leader Adam Bandt insists that this is not the end of the matter and that the government needs to keep new oil and gas projects in the ground to combat the worst impacts of climate change – something the government has not agreed to do.