ASX to fall as strong US spending weakens case for rate cuts

   2024-04-15 16:04


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Australian shares are poised to fall after much stronger-than-predicted retail sales in the US diminished the prospect of interest rate cuts. Gold gains as Israel’s military chief says it will strike back at Iran.

The S&P 500 wiped out an advance in a volatile session to fall more than 1 per cent by the close as interest rate sensitive megacaps Nvidia, Microsoft and Apple declined. Treasuries tumbled and gold jumped as the conflict in the Middle East entered a dangerous new phase, edging closer to last week’s record high.

US retail sales rose by more than forecast in March and the prior month was revised higher, showcasing resilient consumer demand and a surprisingly strong economy. The data also fuelled more concern about inflation becoming entrenched, further delaying Fed easing.

Crude fell, paring some losses after Lieutenant General Herzi Halevi said the Iranian strike of missiles and attack drones “will be met with a response”.

Locally, attention will swing to the health of China’s economy at noon when the world’s second-biggest economy reveals retail sales, industrial production, GDP, and unemployment. Rio Tinto’s production report could also provide some insight into the health of China’s economy.

Stocks in focus


Rio Tinto – The mining company will reveal its operational performance in its first quarter production report at 8.30am. BHP follows the day after.

Josh Gilbert, market analyst at eToro, says traders’ attention will be on how it is coping with the uncertainty in China’s economy is affecting iron ore but also the level of its copper production. “The good news for Rio investors is that the business is growing its copper production faster and that will be a key focal point for investors this week. Its growing copper production is one of the reasons that the market expects earnings to grow by 5 per cent in its next semi-annual report, higher than that of BHP’s.”

Star – Star Entertainment’s chairman and former chief executive privately schemed to wage war on the casino regulator, Chanticleer looks at its hare-brained scheme to sue the regulator.

Domino’s – Shares in the pizza maker have sunk to their lowest since August 2019, with analysts underwhelmed by its strategy.

Woolworths, Coles, Bunnings – The Senate hearing on supermarket pricing continues at 8.30am.

CBA, NAB, ANZ, Westpac, Bendigo, BoQ – Senate hearing on regional bank closures.


QBE, Suncorp, IAG – Parliamentary hearing on insurers’ response to 2022 flood claims.

Market highlights

ASX futures down 68 points or 0.9% to 7720 near 6,20am AEST

  • AUD -0.4% to 64.42US cents
  • Bitcoin -1.5% to $US63,128 at 6.23am AEST
  • On Wall St: Dow -0.7% S&P -1.2% Nasdaq -1.8%
  • In New York: BHP +0.9% Rio +1.2% Atlassian -7.1%
  • Tesla -5.6% Microsoft -2.0% Apple -2.2% Nvidia -2.5%
  • Alphabet -1.8% Amazon -1.7% Meta -2.3%
  • VIX +11.0% QQQ -1.7% TLT -1.6%
  • Stoxx 50 +0.6% FTSE -0.4% DAX +0.5% CAC +0.4%
  • Spot gold +1.7% to $US2383.53/oz at 4.20pm in New York
  • Brent crude -0.1% to $US90.37 a barrel
  • Iron ore +1.2% to $US112.35 a tonne
  • 10-year yield: US 4.61% Australia 4.26% Germany 2.44%
  • US prices as of 4.20pm in New York

What’s driving markets

The strong tailwind from easy financial conditions continues to boost US inflation and growth, including consumer spending in March, Bloomberg cited Torsten Slok at Apollo Global Management as saying


“Given the ongoing re-acceleration in the economy, the Fed will not cut interest rates in 2024,” he noted.

Bond yields rose after the release due to rising concerns about a potential “no-landing, no-rate cut scenario,” according to Sam Millette at Commonwealth Financial Network

Federal Reserve Bank of New York President John Williams pointed to the enduring strength of consumers and the broader economy, but said the central bank will likely start lowering interest rates this year if inflation continues to gradually come down.

“In our view it’s not about ‘higher for longer’ when it comes to the Fed’s rate regime rather, it’s a continuation of the ‘pause for now’ until inflation gives up its stickiness,” said John Stoltzfus at Oppenheimer Asset Management.

Today’s agenda

Local: 8.30am – Senate Hearing: supermarket prices; 9am – Senate Hearing: regional bank closures; House Hearing: insurers’ response to 2022 flood claims; 11.30am – ABS Data: February overseas arrivals and departures.


Overseas: 12pm – China GDP + Industrial Production; 10.30pm – Canada CPI; 11.15pm – US Industrial Production

China’s data dump

“Quarterly GDP from the world’s second-largest economy will likely be the standout, with estimates for GDP to expand 4.9 per cent year-on-year, down from 5.2 per cent last quarter. The property sector remains the main drag on growth, and that will have to change if the region is to meet its ambitious 5 per cent growth target in 2024,” Josh Gilbert, market analyst at eToro, said.

Retail sales are set to rise 4.5 per cent, down from last month’s holiday-driven boost of 5.5 per cent. Industrial production should be 5.4 per cent after last month’s one-off’ jump.

“The question remains: when will the bad news become enough of a catalyst to drive substantial government action and push a flat-lining market into a golden opportunity for investors? It’s difficult to imagine another quarter of disappointing figures without any serious action, but given we’re now 18 months into this saga, it’s more than possible,” Gilbert says.

Meanwhile, China’s overall manufacturing overcapacity has peaked as global demand picks up in consumer sectors, the Economist Intelligence Unit said, predicting trade tensions will persist due to Chinese companies’ rising competitiveness.


“We consider the worst of China’s excess industrial capacity to have already passed,” the EIU said, adding that a slowdown in investment by firms seeing lower profitability will lead to slower capacity growth.

Other top stories

PM’s Made in Australia plan a risk to taxpayers: former RBA boss Bernie Fraser, the only person to serve as both RBA governor and Treasury secretary, has warned governments have a poor record of picking winners.

Workers could get rights to double their holidays  Unions and employers are close to agreement on introducing a right for workers to take twice their annual leave on half pay.

‘Get ready for war’: Star chairman and CEO’s descent into madness The embattled casino group told the world it was co-operating with its regulator. But behind the scenes, it was dreaming up a hair-brained scheme to sue them.

Accolade Wines in buyout offer to end cheap wine glut  Australia’s No.2 wine group has offered to buy out the contracts of 540 grape growers in a Riverland co-operative.

Andrew Hobbs is an online editor and contributor. He has been a financial journalist for more than 25 years, working previously at Bloomberg and Australian Associated Press.

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