ASX 200: Inflation concerns likely to spoil investors’ mood today

Summary

  • According to the ASX 200 futures, the spot index is expected to open 0.8% lower.
  • Wall Street closed lower on Monday as inflation worries instilled fear among investors.
  • In the crypto world, Bitcoin saw a decline of 4.5% to US$55,686, making a new 5-day low.

On Monday, the ASX 200 charged up with full force to mark its new 52-week high. The benchmark index closed the session up by 1.3%, near the high of the day, at 7172.8. However, the Australian market might struggle to retain that the pace today amid weak global cues weighing on the index. According to the ASX 200 futures, the spot index is expected to open 0.8% lower, a weakness of around 60 points.

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Today is an important day for Australia as Treasurer Josh Frydenberg is expected to deliver a much needed big spending 2021-22 budget for Australia in the quest to continue paving the road to economic recovery from the disruptions caused by the COVID-19 pandemic.

More spending on mental health, aged care, childcare, women and disability as well as tax offsets for lower and middle-income class are expected to be announced in the forthcoming budget.

Wall Street closed lower on Monday as inflation worries instilled fear among investors, driving them away from market-leading growth stocks towards cyclicals, which are poised to benefit most as the economy reopens. The Dow Jones fell 0.1%, to 34,742.82, while the S&P 500 1.04%, to 4,188.43. On the other hand, NASDAQ lost a hefty 2.55%, to 13,401.86.

Read More: ASX 200 Made New 100-Day High

Industrial and health-care shares capped the Dow Jones’ decline but the blue-chip average reversed course during the late session to snap a three-day streak of record closing highs.

The first-quarter reporting season has entered the home stretch, with 439 of the companies in the S&P 500 having reported as of Friday. According to Refinitiv IBES, of those 439 companies, 87% have beaten consensus expectations.

Analysts now expect YoY S&P earnings to grow 50.4% on aggregate, more than double the rate forecast at the beginning of April 2021 and considerably higher than the 16% growth estimated on 1 January, as per Refinitiv.

A demand resurgence is colliding with weary supply of basic materials, leading to inflation worries. The concerns over inflation can be eased once the supply lines are rebuilt but that’s going to take some time.

Breakevens on Treasury Inflation-Protected Securities (TIPS) over the coming five years, which measure the Inflation expectations, surged to a decade high of 2.73%. At the same time, the yield on 10-year US Treasury notes was up 2.3 basis points, at 1.602%.

Inflation concerns will take the center stage when the U.S. Labor Department releases its latest Consumer Price Index (CPI) report on Wednesday.

The US dollar index tried to recover from the two-month low made on Friday, making a lower low during the early trading hours but closed 0.08% up at 90.27. The Australian dollar fell 0.14% to 0.7828.

In the crypto world, Bitcoin saw a decline of 4.5% to US$55,686, making a new 5-day low. Dogecoin, the much hyped and talked about cryptocurrency these days, crashed by 18.3% to US$0.465.

Read More: Dogecoin Wasn’t the Only Crypto to Fall After Musk’s SNL Appearance

Oil prices softened

Crude oil prices fell slightly and closed in the negative territory. The WTI crude oil price fell 0.15% to US$64.80 per barrel, while Brent crude was down 0.15% to US$68.19 a barrel.

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Australian energy companies such as Santos Limited (ASX:STO) Beach Energy Limited (ASX:BPT) and Oil Search Energy Limited (ASX:OSH) could spoil the mood of the investors.

Gold prices traded higher

The June gold contract was up 0.24% or US$6.30, to US$1,837.60 an ounce.

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Gold miners may continue to run towards north in today’s session. These miners include Northern Star Resources Limited (ASX:NST), De Grey Mining Limited (ASX:DEG), Resolute Mining Limited (ASX:RSG) and their peers.

Read More: Palladium rockets to an all-time-high; here's what propelled its rally