The Australian share market has closed firmly higher and the Australian dollar has pushed back above 69 US cents.
It follows the unemployment rate unexpectedly rising in January, casting some doubt on the strength of the jobs market, although some forecasters expect things to improve in February.
US retail sales rose strongly in January and Wall Street finished higher after some mixed moves during its session, while European markets also rallied.
Disclaimer: this blog is not intended as investment advice.
Key events
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Live updates
Market snapshot at 4:15pm AEDT
By Stephanie Chalmers
- ASX: All Ordinaries +0.8% to 7,620, ASX 200 +0.8% to 7,410
- Aussie dollar: +0.3% at 69.23 US cents
- Wall Street: Dow +0.1%, S&P 500 +0.3%, Nasdaq +0.9%
- Europe: Stoxx 50 +0.3%, FTSE +0.6%, DAX +0.8%
- Spot gold: +0.2% at $US1,840 an ounce
- Brent crude: +0.5% at $US85.84 a barrel
- Iron ore: +0.8% to $US123.45 a tonne
Strong session for Australian stocks
By Stephanie Chalmers
After a pretty modest start, the major indices have been charging ahead in the afternoon to finish firmly higher.
The ASX 200 has closed 0.8 per cent higher at 7,410 points, reclaiming some of the ground lost in yesterday's 1.1 per cent fall.
After dropping below 69 US cents after the mid-morning jobs data delivered a surprise, the Aussie dollar has pushed higher as well, to around 69.2 US cents.
ANZ became the latest major bank economists to tip the cash rate to peak at 4.1 per cent by May — up from their previous call of 3.85 per cent.
Most sectors finished higher, with only utilities and energy dropping and the financials sector flatlining.
It followed a 1.5 per cent fall in Commonwealth Bank shares, adding to yesterday's slump despite reporting a record half-year profit.
As for the top and bottom percentage moves on the market, packaging firm Orora enjoyed a 14 per cent rise, after its result beat expectations.
But AMP shares slumped nearly 13 per cent after its underlying profit fell in a "challenging economic environment".
ASIC backs bringing BNPL under national credit laws
By Rhiana Whitson
After years of avoiding credit laws, buy now pay later (BNPL) products like Afterpay and Zip, are set to be reined in.
But exactly what that will look like is the big question.
A Treasury paper released in November has proposed three options for regulating BNPL. The toughest is to treat BNPL the same as any other credit product by bringing the sector under the existing National Consumer Credit Protection Act.
Submissions made public today show there's strong appetite for that.
ASIC is among them: "The harms identified in ASIC’s work on buy now pay later arrangements suggest the starting point for consumer protections should be the same as credit products with comparable harms," ASIC notes in its submission.
Others joining consumer advocates and ASIC in bringing BNPL under national credit laws, include:
ANZ, Westpac, Customer Owned Banking Association, Australian Retail Credit Association, Mortgage and Finance Association of Australia, CPA Australia, National Legal Aid and Australian Securities and Investment Commission (ASIC).
CBA, which has its own BNPL product, backs the less stringent option. It wants limited regulation of buy now pay later players under the Credit Act. Zip also backs this option. Afterpay largely backs the status-quo.
With some BNPL providers lending up to $30,000, Choice CEO Alan Kirkland, says it’s unfair and unsafe to allow them to avoid safe lending laws.
"They need to operate on a level playing field with credit cards and personal loans. As cost-of-living pressures rise, it is even more important that people are protected from rogue lenders," Mr Kirkland says.
Assistant Treasurer and Finance Minister Stephen Jones says he'll consider the submissions. New laws to regulate BNPL are expected this year.
Want to know more about this story? ABC business reporter Nassim Khadem has written about the proposed regulation of BNPL:
Will the unemployment rate improve next month?
By Stephanie Chalmers
The ABS noted in its jobs report that there was a larger-than-usual cohort of unemployed people who had jobs ready to go to in the future.
"January is the most seasonal time of the year in the Australian labour market, with people leaving jobs but also getting ready to start new jobs or return from leave.
This January, we saw more people than usual with a job indicating they were starting or returning to work later in the month," ABS head of labour statistic Bjorn Jarvis said.
As a result, NAB economists say the report wasn't as weak as the headline unemployment rate suggested.
"We think February data should bounce strongly, and we note the ‘waiting to start work’ category gave a good guide to the strong recovery out of the Delta lockdowns in 2021 and from Omicron and similar seasonal impacts back in January 2022.
In short, we need to wait for February data for a clear read," writes NAB economist Taylor Nugent.
AMP senior economist Diana Mousina isn't so sure, however. She cites the rising trend in the unemployment rate since November, the decline in the participation rate, a decline in hours worked for the last three months and leading indicators such as job ads, hiring intentions and vacancies.
Do governments have a responsibility to reduce their impact on inflation?
By Gareth Hutchens
Apologies is this question has been asked already. Don't governments have a responsibility to reduce their impact to inflation? Why is it the Australian public, individuals that bear the burden of reducing inflation through higher interest rates? I just saw an announcement by the WA of a new approved stage of infrastructure construction that will commence. Surely pausing such projects in the meantime would have greater impact on putting the breaks on inflation than mum and dad home loans?
- Jenn.K
Another good question.
Plenty of economists say fiscal policy could be doing more heavy lifting at the moment.
As an example, at his press conference today, Treasurer Jim Chalmers was asked about the wisdom of delivering the "Stage 3" tax cuts, which are scheduled to kick-in in July 2024, during an inflationary episode such as this.
Mr Chalmers said it wasn't the government's plan to dump them, so they'll still be happening.
Will those tax cuts be inflationary? I guess we'll see.
Why don't alternative ideas get a look-in?
By Gareth Hutchens
Can we get a wholesale review on our archaic methods of controlling inflation through interest rates hikes. Your previous article outlining various other methods of controlling inflation through deferred savings or changing the employers mandatory super contribution seems fair more equitable and more immediate then our current interest rate hikes. Raising rates target those who have borrowed money and are more susceptible to increases in costs of living...why? Also having a method that returns your money rather then inflating banks profits seems like a win win. Can someone please explain why these other methods have never gained traction?
- Inflation Procrastination
That's a great question.
re: Can someone explain why these methods have never gained traction?
Since the early 1990s, when the Reserve Bank was given "independence" and handed the task of targeting inflation, Australia's overarching macroeconomic policy framework has been set in stone.
The RBA has assumed most of the responsibility for managing inflation, and the economic cycle itself, by manipulating interest rates. Meanwhile, fiscal policy has been relegated to the sidelines.
Is that the best way of doing things?
Like every policy framework, there are pros and cons.
But by making the RBA independent and "off limits" for political debate and interference, it's locked in a particular way of doing things.
Under this regime, the role of fiscal policy has been greatly diminished, and we're told politicians should concentrate on balancing the budget and let the central bank steer the ship.
That's a real coup for the people who like economies to be run this way - because they've locked in their playbook for good.
It also means alternative ideas don't often get a look in.
Why are coal mining stocks taking a hit?
By Stephanie Chalmers
Coal mining companies are among the session's worst performers in afternoon trade, including Whitehaven (-4.3%) and Yancoal (-2.9%).
Both have confirmed the details of a NSW Government policy requiring them to reserve thermal coal for the domestic market.
Yancoal says it'll be compelled to make up to 310,000 tonnes of coal per quarter available to domestic power generators, while Whitehaven said it was finalising its plans to meet its obligations.
The scheme comes in in April and will go through to June 30 next year.
Coal sold under the policy is capped at $125/tonne.
Second straight month of jobs losses
By Stephanie Chalmers
After a very strong 2022, the country's jobs market seems to be cooling off a touch.
While economists had forecast ~20,000 jobs to be added in January, more than 11,000 were lost in the month.
And it was the second consecutive monthly fall in employment.
Here are some of the other highlights (lowlights?) from the ABS report:
- Monthly hours worked dropped 2.1% with a higher amount of annual leave taken
- The number of unemployed people rose by 22,000
- Underemployment rate remained at 6.1%
- More people than usual indicated they were starting or returning to work later in the month
ABC business reporter Gareth Hutchens has some more detail here:
Most sectors of the market on the up
By Stephanie Chalmers
It's pretty much one-way traffic when it comes to sector moves on the ASX 200… apart from energy.
That's reflecting a 9.9% drop in Whitehaven Coal shares, while Origin, Santos and Yancoal are also more modestly in the red.
Market snapshot at 12:10pm AEDT
By Stephanie Chalmers
- ASX: All Ordinaries +0.8% to 7,617, ASX 200 +0.8% to 7,411
- Aussie dollar: -0.4% at 68.77 US cents
- Wall Street: Dow +0.1%, S&P 500 +0.3%, Nasdaq +0.9%
- Europe: Stoxx 50 +0.3%, FTSE +0.6%, DAX +0.8%
- Spot gold: flat at $US1,836 an ounce
- Brent crude: flat at $US85.38 a barrel
- Iron ore: +0.8% to $US123.45 a tonne
Market reaction to jobs
By Stephanie Chalmers
Some mid-morning excitement on the market after that January jobs report came out, showing an unexpected rise in the jobless rate, and jobs lost from the economy.
The ASX 200 added to its early gains, to be up by more than three-quarters of a per cent.
And the Australian dollar fell around half a per cent to 68.7 US cents.
That's because traders are betting the Reserve Bank could have to wind back its more aggressive tone on future rate rises.
However, the reaction may be a bit overstated, according to Capital Economics at least.
The weakness in January’s labour market data underlines that aggressive monetary tightening is starting to cool activity, but with inflation still far too high, that won’t prevent the RBA from hiking interest rates for a while yet.
...Leaving the pandemic aside, the last time employment fell for two consecutive months was in August/September 2016, when the RBA was cutting interest rates. And the recent fall in job vacancies suggests that the labour market will continue to slacken over the coming months.
With Governor Lowe yesterday reiterating that inflation remains “way too high”, we’re sticking to our forecast that the RBA will lift the cash rate to 4.1% by May.
However, the latest set of labour market data add to our conviction that the RBA will loosen policy before the year is out.
Reaction to unemployment increase
By Stephanie Chalmers
Here are a few of the initial takes from Twitter on the jobless rate rising in January:
Unemployment rate unexpectedly rises
By Stephanie Chalmers
A surprise result from January jobs figures — the ABS says the unemployment rate rose to 3.7 per cent in January, with 11,500 jobs lost.
The Australian dollar is taking a dive below 69 US cents as a result.
More details soon!
Origin Energy shares in the red
By Stephanie Chalmers
Shares in Origin Energy are down around 2.2 per cent in mid-morning trade, after its profit result and an update on a takeover bid.
The power company saw its first-half net profit rise to $399 million from a statutory loss a year earlier, but underlying profit slumped more than 80 per cent.
Origin said underlying profit declined during the period as earnings from higher prices for liquefied natural gas and oil were offset by higher fuel and wholesale electricity procurement costs.
However, it expects earnings from its energy markets business to come in at the top end of its forecasts for the full financial year.
Regarding the $15 billion+ buyout bid from a consortium led by Brookfield, Origin said "active engagement" continues and due diligence is "substantially completed".
Origin declared an interim dividend of 16.5 cents per share, compared with 12.5 cents a year ago.
Unemployment rate tipped to stay at 3.5% in January
By Stephanie Chalmers
Just over half an hour before the Australian Bureau of Statistics releases its jobs report for January.
According to a poll by Reuters, the unemployment rate is expected to stay at 3.5 per cent in the month, with 20,000 jobs created and a steady participation rate of 66.6 per cent.
These figures will be closely watched, as always, as so far Australia's jobs market has remained very strong despite concerns over the impact of inflation and rising interest rates.
That's shown up in consumer sentiment surveys, which have indicated that while households may be feeling the pain when it comes to the cost of living and rate hikes, they're feeling pretty secure about their job prospects.
Not everyone is so sure job security will last, however.
Here's a report I prepared earlier this week, where AMP chief economist Shane Oliver explains that rising rates could hit consumer spending to such an extent that it spills over into job losses:
Top and bottom movers
By Stephanie Chalmers
The local session is just getting underway but let's take a look at the top and bottom performing stocks on the ASX 200 so far:
On the top performers list, there are a few consumer stocks, including retail and travel names.
On the flipside, financials and gold miners are losing ground.
AMP is among the biggest percentage losers so far after its profit results.
Its net profit came in at $387 million, which was an improvement on last year's loss, but on an underlying level, profit dropped by around a third.
"Our profit for the year reflects the challenging economic environment we are facing," AMP chief executive officer Alexis George said.
Market snapshot at 10:20am AEDT
By Stephanie Chalmers
- ASX : All Ordinaries +0.2% to 7,575, ASX 200 +0.2% to 7,365
- Aussie dollar: flat at 69.03 US cents
- Wall Street: Dow +0.1%, S&P 500 +0.3%, Nasdaq +0.9%
- Europe: Stoxx 50 +0.3%, FTSE +0.6%, DAX +0.8%
- Spot gold: flat at $US1,836 an ounce
- Brent crude: -0.3% at $US85.28 a barrel
- Iron ore: +0.8% to $US123.45 a tonne
Australian share market on the rise
By Stephanie Chalmers
The ASX 200 and All Ordinaries are both edging higher in early trade.
The modest gains are being led by the industrials, education and consumer sectors but some of the biggest stocks on the market are dragging — including the major miners and banks.
'Lowe's woe'
By Stephanie Chalmers
There's some less-than-glowing commentary about RBA communications this morning, even after yesterday's parliamentary grilling of Philip Lowe.
GSFM investment strategist Stephen Miller has published a note titled 'Lowe's woe', critiquing the central bank's recent commentary around inflation — which he argues has not been much better than the ill-fated assurance that rates wouldn't rise before 2024.
Here's some of Mr Miller's assessment:
"The missteps in RBA communication through 2022, including the 'no increase in the policy rate before 2024' have been well documented.
However, it is more important to recognise that the substantive error that led to that flawed policy communication was the underappreciation of persistence, magnitude, and momentum in inflation.
…In my view, the decision last October to reduce the magnitude of the policy rate increment from 50bps to 25bps was also an error but I would admit that is a more contestable point. That said, it appeared to indicate a reluctance to commit firmly enough to inflation containment.
…Certainly, over the course of the summer the RBA has appeared to shore-up its resolve to aggressively tackle inflation. This was reaffirmed at Lowe’s Parliamentary testimony yesterday.
In my view this new-found hawkishness is a welcome development."
For a recap on Dr Lowe's appearance at Senate Estimates on Wednesday, here's some analysis by David Speers:
International roaming charges taking off
By Stephanie Chalmers
There's an interesting nugget in Telstra's results, which is the take off of international roaming revenue.
Presumably the return of international travel post-COVID has seen more people using their phones while overseas.
Telstra's mobile services revenue rose 9.3 per cent.
"Growth was supported by international roaming lifting by around $100m to approximately 70% of pre-COVID levels"
