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US nonfarms and trade data from China for early support

The majors

It was another bullish day for the ASX200 on Friday, up for the third day in a row.

After rising 0.48% on Thursday, the ASX200 rose 0.39% to end the day at 7,456.94.

A quiet economic calendar late Friday had the ASX200 take its cues from the US ahead of US non-farm salaries.

On that day, the RBA also supported the ASX with an optimistic statement on monetary policy.

The statistics

There were no significant statistics from Australia or China for the markets to consider during the Australian session.

Although statistics were not available, the RBA’s monetary policy statement sparked interest.

The salient points from the statement overview included:

  • The prerequisites for a sustainable global recovery are in place.
  • The rapid increase in vaccination coverage in many countries has allowed restrictions to be relaxed and economic activity to rebound strongly.
  • Expansionary fiscal and monetary policies supported the recovery and continue to support the outlook.
  • Global demand has strained global supply chains and logistics networks, as well as supply disruptions in some sectors.
  • Central banks generally assume that the resulting inflationary pressures will ease and inflation will ease in the coming year.
  • The Australian economy is recovering quickly and in line with the strong underlying momentum of the pre-outbreak economy.
  • GDP is expected to grow by 3% by 2021 and around 5.5% by 2022, before falling back to around 2.5% by 2023.
  • The impact of COVID-19 on the labor market is already easing, with the unemployment rate expected to be below 5% by the end of 2021. The RBA expects an unemployment rate of 4% by the end of 2023.
  • However, due to spare capacity and sluggishness in the wage-setting process, wage growth is expected to increase only gradually.
  • The RBA expects wages to rise by around 3% by the end of 2023, from just 1.7% year-over-year to the June quarter.
  • How consumption will react to higher household wealth is one of the most important uncertainties for the outlook.
  • Both residential construction and corporate investment should provide momentum for the recovery.

On the monetary front

The board strives to maintain highly supportive monetary terms to:

  • Achieve a return to full employment and inflation in line with the goal.
  • In order for inflation to remain between 2 and 3% over the long term, the labor market must:
    • Be closer.
    • Wage growth is expected to be significantly higher than it is now.

The board will not increase the cash rate until these criteria are met and is willing to be patient.

The market movers

It was a mixed day for the banks. CBA rose 1.12% to take the lead with SNAP ended the day by 0.80%. Macquarie group and ANZ (+ 0.24%) and (+ 0.28%) also found support. Westpac however, bucking the trend by 2.80%.

Commodity stocks had a bullish session. Newcrest Mining rose 3.55% to take the lead. BHP group (+ 0.17%), Fortescue Metals Group Ltd (+0.64%) and Rio Tinto (+ 0.56%), however, recorded relatively modest increases.

Other Asian markets

Elsewhere, it was a bearish session, with the Hang Seng Index down 1.41%.

The CSI300 and Nikkei 225 ended the day with relatively modest losses of 0.54% and 0.61%, respectively.

The day ahead

A calm day is ahead in the Asian economic calendar. There are no essential statistics from Australia or China to give direction to the ASX200.

While statistics are absent, we can expect market reaction to Friday’s non-farm payrolls from the US and trade data from China.

According to figures released over the weekend, China’s USD trade surplus has expanded from $ 66.76 billion to $ 84.54 billion. Economists had forecast a decline to 65.55 billion US dollars.

  • Year-on-year exports rose by 27.7% compared to a forecast of 24.5%. In September exports had increased by 28.1%.
  • Imports rose by 20.6% compared to the forecast 25.0%. Imports were up 17.6% in September.

Outside of the economic calendar, corporate profits and commodity prices need to be monitored.

The future

On the futures markets, the ASX200 was up 22 points at the time of writing.

You can find an overview of all today’s economic events in our economic calendar.

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