Chapter 1: What is the main topic discussed in this episode?
A Listener Production.
US markets roar to new record highs. But the Aussie market is set to fall. Plus, it's Budget Week, so what are investors keeping their eye on? Good morning, I'm James Gruber. And I'm Gillian Bowen. It's Monday the 11th of May and this is the morning edition of the CommSec Market Update.
Well, it's a big few days ahead.
Chapter 2: What factors are causing the Australian market to fall?
Markets here will be eyeing details of key policy announcements in the federal budget when all is revealed at 7.30pm Australian Eastern Standard Time tomorrow night by Treasurer Jim Chalmers. There's been a lot of speculation and leaks about potential cost of living relief, changes to capital gains tax concessions, negative gearing and an overhaul of the NDIS scheme.
War developments will also be front of mind following a flare up in tensions between the U.S. and Iran last week.
Chapter 3: What are the key themes of the upcoming federal budget?
And on that, Iranian state media reported on Sunday that Iran has now sent its response to the U.S. proposal for peace talks to end the war. The Australian share market slumped 1.5% on Friday, its biggest fall in seven weeks, and the ASX 200 looks set to extend its losses when it opens later this morning. When ASX futures were last trading, they were down 0.5% or 42 points.
But the records keep coming for Wall Street. The S&P 500 and Nasdaq both finished up on Friday with new record highs. The optimism around company earnings again helping investors put aside any worries about fresh attacks in the Gulf and uncertainty around peace. We'll get into that more shortly, but the figures show it's the strongest US quarterly earnings season in more than four years.
And that's in the face of US crude being up more than 60% for the year.
What a surge. The closure of the Strait of Hormuz, the key contributor there. So how did oil and other commodities go during Friday's session?
Global Oil Prices Guild jumped as much as 3% on Friday after a day in which the US and Iran traded airstrikes but paired gains as traders hoped for a longer pause in the fighting that has shut shipping in the Strait of Hormuz. Brent crude futures settled up 1.2% to US$101.29 a barrel. Base metal prices were higher on Friday.
Copper futures hit a three-month high, up 1.9%, after Freeport McMoran flagged a slight delay in the recovery of production at its Grasberg mine in Indonesia. Meanwhile, aluminium futures were up 0.8% on continued supply concerns. Gold futures firmed on optimism over a potential end to the Iran conflict after Thursday's skirmishes. The futures settled up 0.5% to US$4,731 an ounce.
Meantime, iron ore futures were flat at US$110.93 a tonne, as high shipments from Brazil and the Simundu mine weighed on prices.
So looking at currencies, they were higher against the US dollar. One Australian dollar is buying 72.39 US cents. The euro is worth 1.1788 US dollars, while one US dollar is buying 156.64 Japanese yen. Okay, it's time to go a little deeper into the results of Friday's session on overseas markets. The Dow Jones Index finished flat.
The S&P 500 Index was 0.8% higher and the NASDAQ Index was up 1.7%. So, James, what have been some of the key moves from Friday's session?
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Chapter 4: How are geopolitical tensions impacting global markets?
So European shares slipping in broad-based losses as an earlier flare-up in the Middle East conflict that we've been talking about. hit risk sentiment at the end of the week, which was dominated by geopolitics. So most subsectors declined, with financials and industrials the biggest drags, down 0.7% and 1.5% respectively. Rheinmetall tumbled 9.2% after a broker downgrade.
British Airways owner IAG shed almost 3% after forecasting lower annual profit than expected due to soaring jet fuel costs. Okay, let's take a look at what's on the watch list. In Australia, as I mentioned at the top, it's Budget Week. After plenty of speculation, all will be confirmed when the Treasurer gets to his feet in the House of Representatives tomorrow night.
There'll be analysis from the CBA economics team, which will be on CBA Newsroom and socials. And we'll touch on any relevant details here on the podcast on Wednesday and beyond. And of course, the share market's reaction. Earnings updates from companies continue with Dino Noble today.
In the US, a full Senate confirmation vote on Federal Reserve Chair-designate Kevin Walsh may happen early this week. Earnings season is winding down this week, though, with Fox to report today. US inflation figures are out on Tuesday, while Donald Trump is due to meet with the Chinese president late this week as well. So plenty on. It's time for our one more thing before we go.
James, what do you have for us today?
Gil, everyone is paying attention to inflation rates right now, given its impact on interest rates, and they monitor inflation through the traditional consumer price index.
Lesser known figures from the Bureau of Statistics, known as the Selected Living Cost Indexes, measure inflation differently by including things like mortgage interest payments, and they also break down cost of living increases for different age groups.
Anyhow, last week's release of the selected living cost indexes showed the biggest quarterly rise in living costs for age pensioners and other retiree groups since 2007, up 2.5%, even bigger than 2022 when inflation skyrocketed. It was primarily down to large rises in electricity and pharmaceutical costs.
Other age groups weren't hit as bad, but the figures go to show that cost of living increases remain a huge issue out there.
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