- ASX 200 retraces its intraday gains amid positive Australian employment figures.
- Australia’s private sector activity marked its second consecutive month of expansion in March.
- The S&P 500 reached 5,200 after the Fed maintained rates at 5.5%.
The ASX 200 Index relinquished its intraday gains and slipped into negative territory, trading near 7,740 on Thursday. This reversal could be attributed to the positive Employment data from Australia. The seasonally adjusted Employment Change for February surged to 116.5K, surpassing expectations of 40.0K and the previous figure of 15.3K. Additionally, the Unemployment Rate increased by 3.7%, lower than the anticipated 4.0% and the previous 4.1%. These positive figures contribute to the Reserve Bank of Australia’s (RBA) hawkish stance.
However, the index surged by nearly 1.0% to surpass 7,770 in the early hours, tracking a rally on Wall Street overnight. This surge followed the US Federal Reserve’s reaffirmation of expectations for three interest rate cuts this year. The S&P 500 reached 5,200 after the Federal Reserve’s decision to maintain rates at 5.5%. While Base metals, including copper and palladium, also experienced a rally overnight.
The Australian equity market mirrored a retreat in financial stocks, with notable declines observed across major players. Commonwealth Bank slid to 116.60, marking a decrease of 0.42%, while National Australia Bank dropped to 34.50, down by 0.54%, and Westpac Banking slipped to 26.40, down by 0.75%. Conversely, Telix Pharmaceuticals, Ramelius Resources, and Webjet emerged as top gainers, whereas Brickworks and Strike Energy were among the top losers.
Australia’s private sector activity showed resilience in March, marking its second consecutive month of expansion. The preliminary Judo Bank Services PMI climbed to 53.5 from the previous 53.1, while the Composite PMI edged up to 52.4 from 52.1. However, Manufacturing PMI experienced a decline, dropping to 46.8 from the previous 47.8.
The US Justice Department is preparing to file a lawsuit against Apple, potentially as early as Thursday. The suit alleges that the tech giant violated antitrust laws by impeding rivals’ access to hardware and software features of its iPhone. This legal action is part of the Biden administration’s broader efforts to address antitrust concerns within the tech industry, further escalating its confrontations with major US technology corporations.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
