Market snapshot
- ASX 200 futures: -0.2% to 8,848 points
- Australian dollar: +0.6% 65.54 US cents
- Wall Street (Friday): S&P500 -0.3%, Dow -0.5%, Nasdaq +0.1%
- Europe (Friday): DAX -0.7%, FTSE -0.1%, Eurostoxx -0.3%
- Spot gold (Friday): +1.2% $US3,586/ounce
- Brent crude (Friday): -2.2% to $US 65.50/barrel
- Iron ore (Friday): -0.3% to $US104.50/tonne
- Bitcoin: +1.0 to $US111,195
Prices current at around 7:00am (AEST)
Key Event
EV Resources in trading halt pending acquisition announcement
The South American focussed copper miner EV Resources has requested a trading halt on the ASX this morning, pending announcement about an acquisition and capital raising.
The trading halt will remain in place until Wednesday morning, or the release of the details of the deal to the market.
Key Event
ASX 200 changes sees DroneShield added and Lifestyle Communities cut
There have been some notable movements in the composition of the key ASX 200, with the market operator announcing the rebalancing of the index due to come into effect on September 26.
The military tech business DroneShield, which has seen its share price jump around 300% so far this year, has been added to the index, while herbicide maker and long term ASX 200 constituent Nufarm has been cut.
Troubled retirement village developer, and subject of a Four Corners’ investigation, Lifestyle Communities, has also been deleted with its share price down 36% this year,
ASX 200 additions:
Dalrymple Bay Infrastructure, DroneShield, Ebos Group, Greatland Resources, Iperion, Parenti, Superloop, Tuas
ASX 200 deletions:
Amotiv, Credit Corp, Clarity Pharmaceuticals, Lifestyle Communities, Macquarie Technology, Nufarm, Nuix, PolyNovo, Smartgroup Corporation
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Key Event
Trump’s Fed chair shortlist includes White House advisor
US President Donald Trump has named a shortlist of candidates to be the next chair of the Federal Reserve, including a White House economic advisor and a couple of Fed insiders.
The replacement of current chair Jerome Powell, whose term expires in May next year, has been the subject of intense speculation given the increasingly politicised nature of the job.
The shortlist contained few, if any surprises, and includes White House economic adviser Kevin Hassett, Federal Reserve Governor Christopher Waller, and former Fed Governor Kevin Warsh.
“This aligns with market expectations, with Polymarket odds currently favouring Waller, who has served as a Fed governor since 2020 after being appointed during Trump’s first term,” NAB’s senior FX strategist, Rodrigo Catrill said.
“While all three have a dovish bias in terms of rate policy, on the issue of Fed independence Waller is seen as the most institutionalist (supportive of independence), while Hassett and Warsh may advocate for more aggressive rate moves or shifts in the Fed’s approach to independence.”
Mr Hassett, White House National Economic Council Director, attempted to placate fears of a potentially interventionist approach to the job on the CBS News’ “Face the Nation” programme saying the next chair of the Federal Reserve should be “fully independent of political influence,” including from the President.
“I would say 100% that monetary policy, Federal Reserve monetary policy, needs to be fully independent of political influence, including from President Trump,” Mr Hassett said.
“The fact is that we’ve looked at countries that have allowed the leaders to take over the central banks, and what tends to happen is that it’s a recipe for inflation and misery for consumers.”
Mr Trump’s repeated demands that the US central bank cut rates immediately and frequent berating of Fed Chair Jerome Powell for his stewardship of monetary policy have fuelled questions about the Fed’s ability to set interest rate policy without regard to politicians’ wishes.
So, too, has Mr Trump’s bid to fire Federal Reserve Governor Lisa Cook, who has sued to challenge her dismissal.
“I don’t have a plan to overhaul the Fed right now. I’m just happy to do my job,” Mr Hassett said.
Key Event
Oil price under pressure as OPEC+ raises production again
Oil prices are expected to come under renewed pressure as the OPEC+ cartel agreed to a surprise increase in production over the weekend.
The move to raise output by 137,000 barrels/day (bpd) in October comes as OPEC’s leading producer Saudi Arabia fights to regain market share.
The global benchmark Brent Crude slipped more than 2% to $US 65.50/barrel ahead of the decision.
The decline was fuelled not only by speculation about the increase, but by fears that demand would soften as cracks appear in the US economy after further disappointing news on the jobs front.
OPEC+ has been increasing production since April after years of cuts to support the oil market, but the Sunday decision to further boost output came as a surprise amid a likely looming oil glut in the northern hemisphere winter months.
The latest increase is much lower than the monthly increases of about 555,000 bpd for September and August and 411,000 bpd in July and June.
“The barrels may be small, but the message is big,” Rystad analyst and a former OPEC official Jorge Leon told Reuters.
“The increase is less about volumes and more about signalling — OPEC+ is prioritising market share even if it risks softer prices.”
OPEC+, made up of the Organization of the Petroleum Exporting Countries plus Russia and other allies, found it easy to raise production when demand was growing in summer, but the real test will come in the fourth quarter with expected slowing demand, Mr Leon said.
OPEC’s output increases this year also come as Saudi Arabia has sought to punish other members such as Kazakhstan for overproducing, and as the United Arab Emirates has built new capacity and sought higher targets.
With Reuters
This week: Business and consumer confidence, global inflation
Australia:
Tue: Consumer confidence (Sep), Business conditions (Aug), Business turnover (Jul)
Thu: Household spending insights
International:
Mon: CN — International trade (Aug)
US — Inflation expectations (Aug), Consumer credit (Jul)
Tue: US — Small business optimism (Aug)
Wed: CN — Consumer & producer price indexes (Aug)
US — PPI (Aug), Wholesale inventories (Jul)
Thu: EU — ECB rates decision
US — CPI (Aug)
Fri: US — Consumer sentiment (Sep)
After last week’s data deluge, the upcoming offerings are more reflective and subjective than cold hard numbers
Tuesday sees the release of consumer sentiment compiled by Westpac and Melbourne Institute and NAB’s business survey.
Consumer confidence has been steadily rising for months and jumped 5.7% in August after the RBA rate cut, to a point where optimism and pessimism are now almost evenly balanced.
There’s a similar story with business confidence which has been rising and is now at its highest point in three years and tracking above its long-term trend.
The CBA releases its household spending indicator (Thursday).
July’s HSI was boosted by the Festival of the Boot with both the British & Irish Lions’ tour and the State of Origin series supporting higher spending.
Consumers seem to be flashing their cards more readily at the moment. This latest reading will capture last month’s rate cut as well.
Internationally, inflation data is the big theme.
China drops its August consumer and producer price index data on Wednesday.
The US releases its PPI on Wednesday and CPI on Thursday.
The European Central Bank mulls over interest rate settings on Thursday, but no change is expected given to jobs market is OK, and inflation sits near the ECB target.
For local investors another $720 million worth of dividends will be heading their way this week, according to Commsec calculations.
Key Event
Wall Street eases off record highs as weak US jobs crush bond yields, ASX set to slip
Wall Street’s slip on Friday was hardly a capitulation given the S&P 500 had touched a record intraday high mid-session, but still there was plenty of action thanks to another weak set of US job numbers.
The S&P 500 and Dow ended down 0.3% and 0.5% respectively, while the tech-centric Nasdaq held onto a marginal 0.1% gain.
Futures trading on the ASX 200 closed on Friday night pointing to a 0.3% fall this morning.
Data showing jobs growth in the US cooled further in August was the catalyst for several significant shifts on financial markets.
US non-farm payrolls rose 22,000 against a forecast of 75,000 new jobs.
Data showed that in June, the US economy lost 13,000 jobs instead of the initially reported 14,000 payrolls gain.
That saw not only an even higher conviction that the Fed would cut rates later this month but also raised the possibility the cut could well be 50bps.
“This number today puts a 50-basis-point rate cut at the next meeting back on the table,” Art Hogan, a veteran strategist at B Riley Wealth Management, told Reuters.
“More significantly, I think 75-basis-point before the end of the year is now pretty much of a lock.”
The immediate impact of the jobs news was that US and European equity markets went backwards.
Fears of cracks appearing in the world’s largest economy, and the prospects of a protracted slowdown, appeared to trump the prospects of lower borrowing costs for business.
US Treasury yields tumbled to five-month lows, taking the US dollar down as well and gold got another leg-up on its record-breaking run and is now eyeing $US3,600/ounce.
The Australian dollar gained 0.6% to be heading towards 66 US cents, good news if you are planning a holiday to the US, not so good if you are a local exporter.
“The warning bell that rang in the labour market a month ago just got louder,” Fitch Ratings’ head of US economic research Olu Sonola told Reuters.
“A weaker-than-expected jobs report all but seals a 25-basis-point rate cut later this month.
“The Fed is likely to prioritise labour market stability over its inflation mandate, even as inflation drifts further from the 2% target.
“Four straight months of manufacturing job losses stand out.”
The jobs figures also helped drive down oil prices as traders reassessed the prospects for future demand, along with speculation about another production hike from the OPEC+ cartel.
The global benchmark, Brent Crude, slid more than 2% to $US65.50/barrel
This week’s US consumer price index is the next, and last, key data to be released before the Fed’s rate-setting committee meets on September 17.
Good morning
Good morning and welcome to another week on the ABC markets and finance blog.
Stephen Letts from ABC business team limbering up for a blow-by-blow coverage of the day’s events, where every post is hopefully a winner, but none should be construed as financial advice.
In short, it looks like the local market will follow Wall Street’s lead lower this morning.
Futures trading points to the ASX 200 slipping 0.2% on opening.
As always, the game’s afoot, so let’s get blogging.
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