US consumer prices barely rose in May, increasing pressure for the Federal Reserve to cut interest rates. (REUTERS/Shannon Stapleton)
Australian shares are expected to trade flat, or slightly lower, following a drop in United States, European and Asian markets.
Market snapshot at 7:45am (AEST):
- ASX SPI futures flat at 6,552, ASX 200 (Wednesday’s close) flat at 6,544
- AUD: 69.31 US cents, 54.6 British pence, 61.38 euro cents, 75.18 Japanese yen, $NZ1.05
- US: Dow Jones -0.2pc at 26,005, S&P 500 -0.2pc at 2,880, Nasdaq -0.4pc at 7,793
- Europe: FTSE 100 -0.4pc at 7,368, DAX -0.3pc at 12,116, CAC -0.6pc at 5,375, Euro Stoxx 50 -0.4pc at 3,387
- Commodities: Brent crude -4pc at $US59.77/barrel, spot gold +0.5pc at $US1,333.16/ounce, iron ore flat at $US106.60/tonne
At 7:10am (AEST), ASX futures were largely unchanged, up four points.
The Australian dollar fell by a moderate 0.5 per cent to 69.27 US cents.
In local economic news, the Bureau of Statistics will release its May labour force report at 11:30am (AEST).
Reuters-polled economists are predicting that the unemployment rate will drift lower to 5.1 per cent, and 16,000 new jobs to have been created.
However, the anticipated fall in the jobless rate may be temporary as the job figures coincide with last month’s federal election, which created a large number of temporary roles.
“NAB is forecasting a strong report given the employment boost from temporary workers hired to run the federal election,” NAB head of foreign exchange strategy Ray Attrill said.
“We expect employment grew by 40,000 [jobs].”
But Mr Attrill said that if the unemployment rate stays at 5.2 per cent, or rises, there is a higher chance the Reserve Bank will cut interest rates in July — instead of August, like many analysts are predicting.
Oil prices drag down US markets
On Wall Street, stocks have fallen for a second day as last week’s rally continues to falter.
The Dow Jones index has closed 39 points lower, down 0.2 per cent to 26,005.
The broader S&P 500 lost 0.2 per cent, while the tech-heavy Nasdaq fell 0.4 per cent.
Meanwhile, US consumer prices barely rose in May (+0.1pc), a report from the US Labor Department has revealed — in line with the expectations of economists polled by Reuters.
On a yearly basis, America’s consumer price index (CPI) lifted 1.8 per cent, slowing from April’s 1.9 per cent gain.
“This soft inflation backdrop reinforces our call for two [interest rate] cuts later this year,” said Michael Feroli, an economist at JPMorgan in New York.
“We think next week is probably too soon to expect that action, given that growth is still holding in and trade-related risks remain two-sided.”
Fed fund futures imply around an 80 per cent chance of a US rate cut as soon as July.
Energy stocks were among the worst performers after a steep drop in oil prices overnight, with Brent crude tumbling 4 per cent to $US59.97 a barrel.
It was mainly due to US crude stockpiles, last week, unexpectedly rising to their highest level since July 2017, according to the latest US Energy Information Administration data.
It has raised concerns, amongst traders, about a slowdown in demand against a backdrop of rising US-China trade tensions.
Amid the heightened risk aversion, spot gold has lifted 0.5 per cent to $US1,333 an ounce.
European markets closed lower overnight, with London’s FTSE down 0.4 per cent and Germany’s DAX losing 0.3 per cent.
Asian markets also finished in negative territory on Wednesday afternoon, with Hong Kong’s Hang Seng falling by a steep 1.7 per cent and the Shanghai Composite down 0.6 per cent.