ASX200: Futures Point Northwards ahead of 3rd Quarter Wage Growth Figures

The ASX200

It was back in the red for the ASX200 on Tuesday, with the index declining for a 5^th time in 7 sessions.

Reversing a 0.36% gain from Monday, the ASX200 fell by 0.67% to end the day at 7,420.44.

There were no major stats from Australia to provide direction on the day, leaving the RBA’s monetary policy meeting minutes in focus.

In spite of continued assurances of status quo on interest rates until 2024, the minutes revealed concerns over inflation, which weighed on the day.

The Stats

Salient points from the RBA meeting minutes, however, included:

• Outbreaks of the Delta variant led to a sharp contraction in the Australian economy in the September quarter.
• This delayed, but not derailed, the economic recovery that has been under way since the first half of the year.
• By mid-2022, the Board expects activity to be broadly in line with the pre-Delta recovery path.
• Household consumption was expected to underpin output growth in subsequent quarters as restrictions are eased.
• Inflation in the September quarter had been about 0.25 percentage points higher than expected 3-months earlier.
• Members noted that, in the central scenario, underlying inflation was expected to pick up gradually towards the end of the forecast period.
• While the forecast for inflation was higher than previously, members noted that the outlook for inflation in Australia differed from that for many other advanced economies.
• Members agreed, however, that the distribution of possible outcomes for inflation had widened.
• Two alternative scenarios in light of the considerable ongoing uncertainty around health outcomes and household consumption were considered.
  • A stronger economic trajectory than the central scenario was possible if households increased spending by more than expected.
  • A weaker trajectory could stem from precautionary saving, alongside possible adverse health outcomes, such as the emergence of a new COVID-19 variant or waning efficacy of vaccines in H12022.
• Members acknowledged that the risks to the inflation forecast had changed.
• The main uncertainties related to the persistence of current disruptions to global supply chains and to the behavior of wages at the lowest unemployment rate in decades.

The Market Movers

It was a bearish day for the banks. NAB led the way down, falling by 0.58%, with Macquarie Group and Westpac seeing losses of 0.33% and 0.35% respectively. CBA and ANZ ended the day down by 0.31% and by 0.18% respectively.

Commodity stocks also had a bearish session. Rio Tinto and BHP Group ended the day with losses of 2.23% and 2.59% respectively. Fortescue Metals Group Ltd slipped by 0.31%, with Newcrest Mining falling by 0.98%.

Other Asian Markets

Elsewhere, it was a bullish Day. The Nikkei 225 and CSI300 rose 0.11% and by 0.02% respectively, with the Hang Seng rallying by 1.27%.

The Day Ahead

It’s a relatively quiet day ahead on the Aussie economic calendar. 3^rd quarter wage growth figures will be in focus later this morning.

With the RBA placing a high emphasis on consumption, expect plenty of market sensitivity to the numbers.

We can also expect market reaction to U.S retail sales figures from overnight. October’s numbers showed no immediate effects of rising consumer prices. Retail sales increased by 1.7% in the month, with core retail sales also up 1.7%. Economists had forecast more modest increases of 1.2% and 1.0% respectively.

Away from the economic calendar, expect the markets to continue to respond to commodity price movements through the session.

The Futures

In the futures markets, at the time of writing, the ASX200 was up by 33 points.

For a look at all of today’s economic events, check out our economic calendar.