ASX and Australian dollar rise following a fall in US inflation | Finance Report

ABC News (Australia)

12 Sept 202402:08

Summary

TLDRUS inflation is nearing the Federal Reserve's 2% target, with headline inflation at 2.5% and core inflation steady at 3.2%. Despite housing costs remaining high, a rate cut of 0.25% is expected next week. Markets reacted positively to the CPI decline, with S&P 500 up 1% and NASDAQ up 2%. Trump Media & Technology Group's stock slumped post-debate, and Taylor Swift's endorsement of Kamala Harris confused investors. Australian market rose 1%, with banks and miners leading gains, while Nine Entertainment shares fell after CEO resignation. Commodities like iron, oil, and copper rose, gold fell, and the Australian dollar strengthened against the weakening US dollar.

Takeaways

📉 Inflation in America is nearing the Federal Reserve's target of 2%, with headline inflation at 2.5% and core inflation steady at 3.2%.
🏠 The main issue with inflation in America remains housing, with 'Shelter inflation', primarily rent, still above 5%.
📉 A US rate cut of 0.25% is expected next week, but it's not anticipated to be a significant reduction.
📈 The decline in headline CPI was positively received by the markets, leading to a 1% rise in the S&P 500, a 2% rise in the NASDAQ, and a 3.5% rise in the Nikkei in Japan.
📉 Trump Media and Technology Group's stock price slumped after a debate, reflecting uncertainty about its future if Trump were to win the election.
📉 Australian market saw a 1% increase, driven by gains in banks and miners.
📉 Nine Entertainment shares fell significantly following the resignation of CEO Mike Sneesby.
📉 Since April 2021, Nine Entertainment's stock has fallen by 58%, which is not typically conducive to CEO longevity.
📈 Commodity prices for iron, oil, and copper increased, while gold prices fell.
📈 The Australian dollar appreciated as the US dollar weakened.

Q & A

What is the current status of inflation in America according to the transcript?
-Inflation in America is not yet back to the Federal Reserve's target of 2%, but it is close. Headline inflation has decreased to 2.5%, and core inflation, which excludes food and energy, remains steady at 3.2%.
What is the expected action by the Federal Reserve regarding interest rates in the transcript?
-A rate cut by the Federal Reserve is anticipated for the following week, but it is expected to be a modest 0.25% rather than a significant reduction.
What is the issue with inflation in the housing sector as mentioned in the transcript?
-The issue with inflation in the housing sector, also known as Shelter inflation, is that rent prices are still above 5%, which is higher than the overall core inflation rate.
How did the decline in headline CPI affect the stock market as per the transcript?
-The decline in headline CPI was well received by the markets, leading to a 1% rise in the S&P 500, a 2% rise in the NASDAQ, and a 3.5% rise in the Nikkei in Japan.
What happened with Trump Media and Technology Group's stock as described in the transcript?
-The stock of Trump Media and Technology Group, which is associated with former President Trump's social media platform called TRUTH Social, slumped after a debate, indicating a potential decrease in confidence if Trump were to win the election.
What was the impact of Taylor Swift's endorsement of Kamala Harris on the US market as mentioned in the transcript?
-The transcript suggests that investors were uncertain about the impact of Taylor Swift's endorsement of Kamala Harris on the Republican candidate, but it did not specify any direct market impact.
What happened in the Australian market as described in the transcript?
-The Australian market experienced a 1% increase, with solid gains by banks and miners.
Why did Nine Entertainment shares fall significantly as mentioned in the transcript?
-Nine Entertainment shares fell significantly following the resignation of CEO Mike Sneesby. The transcript notes that such a decline is not unusual for this stock, especially considering it has fallen 58% since Mr. Sneesby took over in April 2021.
How did commodity prices change in the market as per the transcript?
-Iron, oil, and copper prices went up, while gold prices fell.
What happened to the Australian dollar in relation to the US dollar as mentioned in the transcript?
-The Australian dollar increased in value because the US dollar fell.

Outlines

00:00

📉 US Inflation and Market Response

The US inflation rate is nearing the Federal Reserve's target of 2%, with headline inflation at 2.5% and core inflation steady at 3.2%. Despite the housing sector's inflation, referred to as 'Shelter inflation,' remaining above 5%, the overall decline in headline CPI was positively received by the markets. As a result, the S&P 500 rose by 1%, the NASDAQ by 2%, and the Nikkei in Japan by 3.5%. However, Trump Media & Technology Group's stock, which is seen as a proxy for betting on a potential Trump election win, slumped after a debate and Taylor Swift's endorsement of Kamala Harris, causing uncertainty for investors. The Australian market also saw gains, with a 1% increase, led by banks and miners, while Nine Entertainment shares fell significantly following the resignation of CEO Mike Sneesby. Commodity markets saw iron ore, oil, and copper prices rise, while gold fell. The Australian dollar appreciated as the US dollar weakened.

Mindmap

Keywords

💡Inflation

Inflation refers to the rate at which the general level of prices for goods and services is rising, and subsequently, the purchasing power of currency is falling. In the context of the video, inflation in America is discussed in relation to the Federal Reserve's target of 2%, with the current headline inflation at 2.5%. This is a key economic indicator that affects monetary policy and consumer spending.

💡Federal Reserve

The Federal Reserve, often referred to as the Fed, is the central banking system in the United States. It plays a crucial role in setting monetary policy, including interest rates, to manage inflation and stabilize the economy. The video mentions the Fed's preference for a 2% inflation rate and anticipates a rate cut, highlighting its influence on financial markets.

💡Core Inflation

Core inflation is a measure of inflation that excludes the prices of volatile items such as food and energy. This provides a more stable and consistent measure of price changes. In the video, core inflation is steady at 3.2%, indicating the underlying trend of price increases, excluding more erratic components.

💡Rate Cut

A rate cut refers to a reduction in interest rates by a central bank, like the Federal Reserve. This is typically done to stimulate economic growth by making borrowing cheaper. The video suggests that a rate cut is expected, although it will likely be a modest 0.25%, rather than a significant move.

💡Housing Inflation

Housing inflation, also known as 'Shelter Inflation,' specifically measures the changes in the cost of housing, primarily rent. The video highlights that housing inflation remains above 5%, suggesting that the cost of living, particularly in terms of housing, is increasing at a faster pace than other areas.

💡Headline CPI

Headline CPI, or Consumer Price Index, is a measure that tracks the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The video notes a decline in headline CPI, which was well received by the markets, indicating a positive reaction to slower overall inflation.

💡S&P 500

The S&P 500, or Standard & Poor's 500, is a stock market index that measures the performance of 500 large companies listed on stock exchanges in the United States. It is often used as a gauge of the health of the U.S. economy. In the video, the S&P 500 rose by 1%, reflecting a positive market response to economic news.

💡NASDAQ

The NASDAQ, or National Association of Securities Dealers Automated Quotations, is a major stock exchange in the United States that focuses on technology companies. It is another key indicator of market performance. The video mentions a 2% rise in the NASDAQ, suggesting strong investor sentiment in technology stocks.

💡TRUTH Social

TRUTH Social is a social media platform associated with former U.S. President Donald Trump. The video discusses the financial implications of this platform through Trump Media & Technology Group, which is seen as a speculative investment related to Trump's potential electoral success.

💡Australian Market

The Australian market refers to the financial market in Australia, where stocks, bonds, and other financial instruments are traded. The video notes a 1% increase in the Australian market, indicating a positive trend in the country's financial sector.

💡Commodity Prices

Commodity prices refer to the cost of raw materials and agricultural products in the market. The video mentions that iron ore, oil, and copper prices went up, while gold prices fell. These fluctuations can significantly impact economies and industries that rely on these commodities.

💡Australian Dollar

The Australian dollar is the currency of Australia. The video notes that the Australian dollar appreciated because the U.S. dollar fell. Currency movements can affect trade, investment, and the overall economy, as they influence the cost of imports and exports.

Highlights

Inflation in America is nearing the Federal Reserve's target of 2%.

Headline inflation has decreased to 2.5%.

Core inflation, excluding food and energy, remains steady at 3.2%.

A US rate cut of 0.25% is anticipated for the following week.

The only persistent inflation issue in America is housing, with rent inflation above 5%.

The decline in headline CPI was well received by the markets.

The S&P 500 rose by 1% following the CPI news.

The NASDAQ increased by 2% in response to the economic data.

The Nikkei in Japan also saw gains, rising by 3.5%.

Trump Media and Technology Group's stock price slumped after a debate and Taylor Swift's endorsement of Kamala Harris.

Investors were uncertain about the impact of the debate and Taylor Swift's political endorsement on the Republican candidate.

The Australian market experienced a 1% increase, driven by banks and miners.

Nine Entertainment shares fell significantly following the resignation of CEO Mike Sneesby.

Since April 2021, Nine Entertainment's stock has fallen by 58%.

Iron, oil, and copper prices increased, while gold prices fell.

The Australian dollar appreciated as the US dollar weakened.