The S&P/ASX 200 (ASX: XJO) is expected to edge higher when the market opens on Thursday, following a slightly positive lead from US markets overnight. Here’s what’s making headlines.
ASX 200 hits another record
The ASX 200 has taken the mantle of overseas markets, hitting another record on Wednesday after moving 1% higher.
The energy sector was the biggest contributor with the oil price hitting a two-year high in overnight trading, sending the entire sector up 4% on Wednesday.
Pure pay energy companies including Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) jumped by 6.5% and 4.6%, respectively, with diversified energy retailer Origin Energy Ltd (ASX: ORG) also jumping 5.8% on the news.
The utilities sector, which includes pipelines and electricity transmission, added 2.6% whilst only the healthcare and IT sectors detracted.
Predictions that the iron ore price had peaked were clearly wrong with the commodity jumping 10% in Chinese trade, hitting US$209 per tonne once again. This sent BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) up 3% and 2% respectively.
Other highlights were chicken producer Inghams Group Ltd (ASX: ING), up 6.6%, and Vicinity Centres (ASX: VCX), which overcame another seven days of lockdown in Melbourne to increase 3.2%.
Unpacking Australian GDP results
Australian GDP came in below most analyst estimates, with the economy growing by 1.8% in the March quarter. This took the year-long result to 1.1%, suggesting the Australian economy is now larger than it was prior to the pandemic.
Australia is one of just five countries around the world that has managed this sort of recovery, putting us in rare air.
There is little doubt what has driven the recovery, with iron ore, coal and other commodity exports continuing to reach records and benefitting from huge prices increases.
That said, net exports actually detracted in the March quarter as imports grew amid a loosening of trade border restrictions.
Spending increases
The key drivers were household spending and private investment, with a 14.8% jump in spending at hotels and restaurants overcoming a 0.5% fall in spending on goods, food and alcohol.
It is clear where the government stimulus has been directed, with housing investment jumping 6.4% as the Home Builder program hit full stride and equipment purchases 11.6% thanks to the tax write offs on offer.
Savings rate remains high
On the negative side, the savings rate remains stubbornly high at 11.6% compared to last quarter’s 12.2%, suggesting predictions of a spending boom haven’t quite come to fruition.
