The ASX is expected to rise this morning, taking direction from Wall Street, which surged on the back of the slowing pace of annual headline inflation in July from June.
Given the positive overnight news, ASX Futures (SPI 200) implied the ASX 200 would open 70 points higher, up 1.01%.
Here’s what we saw (Source Commsec):
- The Euro rose from lows near US$1.0200 to highs near US$1.0367 and was near US$1.0300 at the US close.
- The Aussie dollar lifted from lows near US69.47 cents to highs near US71.08 cents and was near US70.80 cents at the US close.
- The Japanese yen rose from near 135.10 yen per US dollar to JPY132.05 and was near JPY132.90 at the US close.
- Global oil prices rose following the release of encouraging data on US gasoline demand. US crude inventories rose by 5.5 million barrels last week, ahead of analyst expectations for an increase of 73,000 barrels, according to the US government. But gasoline product supplied rose in the most recent week to 9.1 million barrels per day.
- The Brent crude price rose by US$1.09 or 1.1% to US$97.40 a barrel.
- The US Nymex crude price gained US$1.43 or 1.6% to US$91.93 a barrel.
- Base metal prices were mostly higher on Wednesday after data showed US inflation was weaker-than-expected in July. The US dollar eased, supporting commodity prices, with nickel up 4.3% and copper 1.3% higher. But aluminium fell by 0.2%.
- The gold futures price rose by US$1.40 an ounce or 0.1% to US$1,813.70 an ounce.
- Spot gold was trading near US$1,791 an ounce at the US close.
- Iron ore futures fell by just US1 cent or less than 0.1% to US$109.27 a tonne.
What does the pull back in US inflation mean?
Inflation pulled back from 41-year highs, down to 8.5% in July.
“A number of components that people have been flagging as being potentially problematic and keeping inflation persistent at high levels, started to show some easing,” Stephen Hoedt, managing director at equity and fixed income research at Key Private Bank.
“I really do think that that opens the possibility to the Fed considering 50 basis point hikes instead of 75,” Hoedt said.
Generally, the news is seen to ease pressure on how much US interest rates will rise still – with the consensus being a 50-basis points rate hike in September.
The percentage of that rose from 32% a day ago to 57.5%, according to CME Group (NASDAQ:CME).
However, there are still worrying inflationary signs.
While gas prices have fallen, some analysts feel inflation is still running at a worryingly high rate due to significant rises in shelter and food costs. Shelter makes up about one-third of the CPI weighting and rose 5.7% over the past 12 months.
“The persistence of still solid inflation data witnessed today, when combined with last week’s strong labor market data, and perhaps especially the still solid wage gains, places Fed policymakers firmly on the path toward continuation of aggressive tightening,” wrote Rick Rieder, chief investment officer of global fixed income at BlackRock Inc (NYSE:BLK) and head of the BlackRock global allocation investment team.
The surge on Wall St saw the Nasdaq 100 move to a little over 20% off its June lows and just shy of its 38.2% Fib retracement, which historically defines a new uptrend and/or bull market.
History suggests only macroeconomic events can stop that trend.
All indices in the US hit their highest levels since May. The Dow Jones Industrial Average finished 535.10 points higher, or 1.6% to 33,309.51, the S&P 500 advanced 87.77 points, or 2.1% to close at 4,210.24, while the Nasdaq Composite rallied 360.88 points, or 2.9% to 12,854.80.
Mixed results for Telstra during earnings season, but positive outlook ahead
In what was a surprise move, Telstra Corporartion Ltd lifted its final dividend to 16.5 cents per share, however its earnings results were mixed.
Revenue dropped 1.5% to $21.2 billion, however earnings and profits dived closer to 5%. Earnings before interest, tax, depreciation and amortisation (EBITDA) was $7.2 billion, and after-tax profit was $1.8 billion.
Outgoing CEO Andy Penn was positive about the outlook.
“Our mobiles result was outstanding, Consumer and Small Business Fixed grew sequentially in the second half, Enterprise returned to growth, and we started to realise the benefits of setting up our infrastructure assets as standalone InfraCo businesses,” Penn said.
The increased dividend was the first time in seven years that Telstra has lifted the dividend. The payment is still fully franked and will be paid on September 22.
Mobile delivered the largest earnings boost from $3.3 billion to $4 billion in the 2022 financial year, however fixed consumer and small business earnings more than halved to $55 million due in large part to continued NBN costs.
The company also completed its T22 restructure, which is designed to account for NBN and bring Telstra further into the digital world.
“We knew we needed to fundamentally transform the company, to simplify and digitise, to set bold aspirations and radical interventions and that is what we have done,” Penn said.
“Telstra is a very different company today and while of course there is always more to do, we are much better equipped to face the very exciting digital future ahead.”
“We are a much simpler, more agile, more efficient, leaner, more customer-focused and more digitally-enabled business.”
In FY23, Telstra aims to deliver a total income of at least $23 billion and an underlying EBITDA between $7.8 billion and $8 billion.