The Australian sharemarket jumped on Thursday morning, signalling an end to the local bourse’s fifth consecutive rout amid concerns sticky inflation in the United States would prompt the Federal Reserve to delay cutting interest rates.
‘The combination of geopolitical uncertainty, rising interest rates, Fed hawkishness, and inflation frustration have combined to put bears temporarily in charge.’The Reserve Bank is looking for a slowdown in the economy, which includes a rise in the unemployment rate, to begin cutting interest rates. A weak unemployment figure could further push back the rate cuts.
Powell signalled on Tuesday that policymakers would wait longer than previously anticipated to cut interest rates following a series of surprisingly high inflation readings. Fed officials narrowly pencilled in three cuts in forecasts published last month — but investors are now betting on just one to two this year, futures markets show.
Meanwhile, President Joe Biden vowed to keep United States Steel Corp American-owned and called for higher tariffs on Chinese steel and aluminum as he sought to woo union workers ahead of November’s election. They noted positive developments including artificial intelligence pushing productivity and earnings higher, lower warranted equity risk premium, likely falling labour costs and fewer worries on margin pressures.The equity risk premium for US equities — a measure of the differential between stocks and bonds’ expected returns — is now deep in negative territory, something that hasn’t happened since early 2000s.