The ASX is tipped to fall today, with ASX futures predicting a flattening of 1.5% or 104 points to 6,922.
The bearish sentiment follows US Federal Reserve chair Jerome Powell’s hawkish comments at the Federal Reserve’s annual Jackson Hole Economic Symposium on Friday, during which he warned that the path to reduced inflation would likely bring more pain, and require “using our tools forcefully to bring demand and supply into better balance”.
Collateral damage to economy, jobs
Powell warned of collateral damage to the US economy and job market in the process.
"While higher interest rates, slower growth and softer labour market conditions will bring down inflation, they will also bring some pain to households and businesses," he said, in a speech that also flagged that the tight monetary policy would need to continue for some time to beat back inflation.
The shock of the speech was probably compounded by a common expectation in the US that the Fed would take the foot off the pedal as inflation appeared to cool, and as President Joe Biden kicked into campaign mode in a positive mood with the November mid-term elections on the horizon.
Dow Jones Industrial Average plunged more than 1,000 points after Powell’s keynote, while the S&P 500 lost 3.4%, its biggest drop since mid-June, with all 11 sectors lower. The Nasdaq finished 3.9% lower following a tech-led sell-off.
The picture across the week was pretty clear – the Dow lost 4.2%, the S&P 500 fell 4.0% and the Nasdaq dropped 4.4%.
Bleak times in Europe
Things could be worse – in the UK, the pound continues to flatline and is close to its weakest level against the US dollar since 1985; inflation looks set to hit 18% next year and the Bank of England is forecasting a five-quarter recession starting later this year; and, to thoroughly wear out the phrase, winter is coming, bringing with it the spectre of an energy crunch.
Speaking of energy, the crisis isn’t about to ease any time soon. Germany is the most vulnerable, with its dependence on Russian fuel exposing nearly all sectors, with those most sensitive to a gas shock underperforming on the Stoxx 600.
In other news to start the week on the continent, the pan-European STOXX 600 index fell by 1.7% to be down 2.6% over the week, the Dax index lost 2.3%, the FTSE fell by 0.7% and German consumer sentiment data was weak. BHP and Rio Tinto bucked the trend during London trade, both lifting by under a per cent.
It’s Equal Pay Day
Back home, today is Equal Pay Day and there are some troubling facts to contend with. For one, the Workplace Gender Equality Agency (WGEA), which tracks the national gender pay gap, calculates that women need to work an extra 60 days to earn as much as men.
In 2022, the national gender pay gap is 14.1% for full-time employees, a rise of just 0.3 percentage points over the last six months. The average woman working full-time collected $1,609.00, while men working full-time earned $1,872.90.
The full-time average weekly earnings difference between women and men is $263.90.
The WGEA says employers can take action by:
- conducting a pay gap audit, develop an action plan and establish accountabilities;
- setting targets to promote gender equality at all levels of the organisation;
- designing leadership roles that can be part-time and promote women into leadership;
- normalising flexible working arrangements; and
- introducing a robust gender-neutral paid parental leave policy.
Last week, Proactive featured another financial gender gap for women to navigate, which is worth a read.
In other news
Global oil prices rose on Friday amid fears that the OPEC+ group could cut production following the Fed chair’s aforementioned hawkish remarks.
Brent crude rose by US$1.65 or 1.7% to US$100.99 a barrel, while US Nymex rose by 54 US cents or 0.6% to US$93.06 a barrel. Across the week the picture was starker – Brent rose by US$4.27 or 4.4% and Nymex rose by US$2.29 or 2.5%.
Base metal prices were higher as last week ended, with aluminium rising the most, up 2.4%, while nickel bucked the trend, down 0.2%. Over the week those figures were more pronounced, with aluminium rising 4.6% while nickel fell 2.9%.
The gold futures price fell by US$21.60 an ounce or 1.2% to US$1,749.80 an ounce. Spot gold was trading near US$1,737 an ounce at the trade wound up in the US on Friday.
Over the week gold fell by US$13.10 or 0.7%.
Iron ore futures rose by 42 US cents or 0.4% to US$105.38 a tonne. Over the week iron ore rose by US$1.17 or 1.1%.