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Chapter 1: What is the main topic discussed in this episode?
a listener production. The Aussie market's back in the red after yesterday's small lift. Why have tech stocks been so volatile around the world this week? And what does today's jobs data mean for Aussie rate hikes? Good afternoon, I'm Steve Daglian. It's Thursday, the 25th of June. Welcome to the CommSec Market Update.
Chapter 2: What caused the ASX 200 to drop today?
Well, we're back in the red today on the local share market, the ASX 200, down by around 0.7%. So we actually look like we're going to finish near the worst levels of the day. It's more than enough to completely wipe out yesterday's gains, which were tiny.
Chapter 3: Why are tech stocks experiencing volatility globally?
We're up about a quarter of a percent. and it does mean we've had five declines now in six trading days as well. So we're now down more than 2% or so since hitting that five-week high just last Wednesday. So things changed pretty quickly.
Chapter 4: What impact does today's jobs data have on Australian interest rates?
Now, a lot has happened in markets over the past day. I should touch on tech stocks because they have been all over the place around the world. In fact, so far this week, the tech-heavy NASDAQ has had its second worst week of the entire year. And South Korea's market also has come under a lot of pressure.
So remember a couple of days ago, it triggered a circuit breaker, which is when the market there falls by 8% or more. And that means they basically pause trade for 20 minutes. They've got that built into their system over there. We don't here in Australia. But today's a much better day for those stocks. South Korea's market's up around 7%.
We've got signs that the US market might get off to a solid start tonight as well, particularly that tech-heavy NASDAQ which is on track, it seems, to lift by around 2% on the open this evening. Now, the reason is because a chip maker called Micron, the ninth largest company in the US, early this morning after the close of the US market, released its latest quarterly results.
And they were quite well received, it seems, initially by markets. And that's because we basically had sales quadrupling over the past quarter. quarter, topping what the market expected. So topping market estimates and also the outlook for the future seemed to be north of what analysts were expecting as well.
So these results have reassured markets for now that demand for chips are still very strong. Doesn't mean that much for a little local share market so much because our tech sector is tiny. It's about 2% of the Australian share market. What's received more attention for us locally over the past couple of days is economic data. So yesterday was all about inflation, which was basically mixed.
Headline inflation was encouraging because it showed that things were cooling a little. and then underlying inflation, which is what the RBA watches most, was hotter than expected. So today, all eyes were on jobs because at 11.30am, we had the latest read for the month of May.
Now, it was a messier read on employment today, and it seems like the Easter and Anzac Day holidays, which all landed in April, make interpreting some of the numbers a little more difficult. But employment did lift by 40,300 in May. That was above the 32,500 the market had anticipated. But we've got to remember that in April, we had a little bit of a down month.
So the numbers there were downwardly revised today to a fall of 40,700. So what today's lift of around 40,000 has done is basically just reverse the losses that we had back in April. The Unemployment rate did improve, though, from 4.5% down to 4.4%.
But overall, I think it shows that the labour market remains a little tight, but the unemployment rate is also showing signs of creeping higher, and it has for a few years now. More forward-looking indicators, things like job vacancies, the number of jobs being advertised has been pretty soft so far this year.
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Chapter 5: How is the strong US dollar affecting commodity prices?
It's been weighing on commodity prices as well because most commodities are priced and denominated in US dollars. So there are concerns, I guess, that the Federal Reserve could lift interest rates at some stage this year. In fact, the market is pricing in at least one rate hike by the end of the year probably coming through by October. That's what the market is pricing in at least.
So that hasn't been helpful, certainly for commodities. We've also seen, as I said, the banks taking a bit of a hit. CBA is down 1.2%, Westpac's down two, we've got NAB down more than 3%. And today in that financial space, we heard from Judo Capital, which actually came out with an update and essentially its shares have taken a pretty nasty knock.
They've been falling about 40% for most of the day following a profit downgrade and a deterioration in asset quality for Judo Capital. Worley is down by about 9%.
The engineering firm slumped on its second profit warning in as many months, saying that the ongoing conflict in the Middle East has been hurting the business recently and will probably take around a $60 million hit to profits due to that as well. The price of gold has fallen below $4,000 per ounce for the first time in seven months.
And again, that's related to the fact that the market's expecting a rate hike in the United States and the fact the US dollar has been quite strong. So it's a reason why many of the gold miners are doing quite poorly today across the board. There have been some winners on the market, though. We're seeing, for example, companies like LendLease. It's up around 9%.
The property group announced the sale of an interest in Keaton Retirement Living Trust, and it's selling that to Aware Super. That's a 25% interest for about $525 million. What the market seems to like is that it's simplifying the business, but it also said that it's going to use that money to pay down debt. We've also got some defensive areas of the market doing well.
So healthcare stocks are up two and a half. We're continuing to see a bit of a bounce back from the likes of CSL. It's had a pretty rough year so far. And A2 Milk is up by around 4% as well. It declared a special dividend, which will be paying out on the 24th of July, overall worth about $300 million.
Now, this isn't a huge surprise because it already flagged the announcement was coming a couple of days ago. And this was off the back of approval from a Chinese regulator that basically means it can launch new products later on this year. And it saw this as a milestone for its growth in China moving forward. So from here, there are a few things to be on the lookout for tonight.
We do have an important update on inflation in the US ahead of the US market open. This is one of the Federal Reserve's favoured measures of prices. So it's certainly going to get a bit of attention, particularly because in the last couple of weeks, we had the Federal Reserve growing a little more hawkish.
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