Australian shares are expected to rise sharply in morning trading after Apple, Tesla and other mega-cap growth stocks led a rebound on Wall Street.
- Economists predict Australian wages rose 0.8% in the March quarter
- This would mean workers received a 2.5% pay rise in the past year
- The annual inflation rate was much higher (at 5.1 pc)
ASX futures had gained 1% to 7,181 points, as of 8:00 a.m. AEST on Wednesday.
The Australian dollar jumped 0.8% to 70.3 US cents.
The broad rally in U.S. stock markets came after weeks of intensive selling that last week saw the S&P 500 plunge to its lowest level since March 2021 and the Nasdaq fall into a bear market.
Recently punished shares of Microsoft, Apple, Tesla and Amazon rose 2% to 5.1%, dragging the S&P and Nasdaq higher.
The S&P 500 climbed 2% to end the session at 4,089 points.
The Nasdaq closed 2.8% higher at 11,985 points, while the Dow Jones rose 1.3% to 32,655.
Wage growth could lead to ‘oversized’ rate hike
The Australian dollar could get a “modest boost” if today’s wage growth data is stronger than expected, said Carol Kong, currency strategist at Commonwealth Bank.
The highly anticipated figures will be released by the Bureau of Statistics (ABS) at 11:30 a.m. AEST.
Economists polled by Reuters expect Australians to have received, on average, wage increases of 0.8% in the March quarter, taking the annual rate to 2.5%.
However, this would not be enough to meet the rising cost of living.
Recent figures from the ABS showed that headline inflation jumped 5.1% over the past year.
An “upside surprise” in the earnings result would show that wage inflation is “more widespread” than the Reserve Bank thought, said NAB currency strategist Rodrigo Catril.
If that were to happen, he said the RBA might have to raise interest rates by an “oversized” 0.4 to 0.5 percentage points, when it meets next on June 7.
Market prices for recession are ‘simply too high’
The rally in U.S. stocks was partly a reaction to overselling after the Nasdaq and S&P 500 posted their sixth straight weekly loss last week, said Anthony Saglimbene, global market strategist at Ameriprise Financial.
“There’s this battle in the stock market between which breaks first – inflation or the consumer.
“The stock market is betting that consumption will break and the credit markets are betting that inflation will break first.
The S&P 500 Banks index jumped 3.8%, with Citigroup climbing almost 8%, after Warren Buffett’s Berkshire Hathaway disclosed a nearly $3 billion investment in the US lender.
Walmart fell 11.4%, after the retail giant slashed its full-year profit forecast, signaling a hit to margins. It marked the biggest one-day percentage drop for Walmart shares since 1987.
A positive March quarter earnings season was overshadowed by concerns over the conflict in Ukraine, soaring inflation, COVID-19 lockdowns in China and aggressive central bank policy tightening.
Investors were also buoyed by data showing U.S. retail sales rose 0.9% in April as consumers dined out more often and purchased motor vehicles amid improving economic conditions. ‘offer.
After hitting seven-week highs, oil prices fell overnight as Reuters reported that the United States may ease some restrictions on the Venezuelan government, raising hopes the market could see additional supplies.
Prices also fell after US Federal Reserve Chairman Jerome Powell warned that the economy could be hurt by attempts to reduce inflation.
Brent crude fell 1.3% to $112.77 a barrel.
Spot gold was flat at US$1,814.53 an ounce.
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