ASX Dips Ahead of Federal Budget, US Inflation Data

Australian stock market slips 0.4% ahead of federal budget release and US inflation data. Treasurer Jim Chalmers is set to deliver the federal budget, expected to include cost-of-living relief measures and a $9.3 billion surplus.

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Aqsa Younas Rana
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ASX Dips Ahead of Federal Budget, US Inflation Data

ASX Dips Ahead of Federal Budget, US Inflation Data

The Australian stock market slipped 0.4% on Tuesday, with the S&P/ASX 200 index closing at 7,715.80 points, as investors remained cautious ahead of the federal budget release and key US inflation data. The real estate and tech sectors led the decline, while the discretionary and healthcare sectors outperformed.

Why this matters: The federal budget and US inflation data have significant implications for monetary policy and the broader economic outlook, which can affect investor sentiment and market performance. The impact of these events can also influence consumer spending, employment, and overall economic growth.

Among the key performers, GUD Holdings soared 12.1% after issuing a bullish trading update, stating it was on track to meet its full-year earnings guidance of $193.5 million despite a weaker automotive market. Neuren Pharmaceuticals and copper-related stocks also posted gains, benefiting from rising copper prices.

Treasurer Jim Chalmers is set to deliver the federal budget Tuesday evening, with expectations of a $9.3 billion surplus for the current financial year. The budget is anticipated to include cost-of-living relief measures for households, such as support for renters and energy bills. However, economists warn that temporary subsidies may not effectively rein in underlying inflation and could undermine the Reserve Bank of Australia's efforts.

The budget's impact on inflation will be a key focus for investors, with the RBA forecasting headline inflation to rise from 3.6% to 3.8% through the second half of 2024. Treasury is expected to forecast CPI inflation of 3.5% for the 2023/24 financial year, down from 3.75% in the mid-year update and below RBA projections.

In the US, investors are closely watching inflation data due this week, including the April consumer price index on Wednesday and the producer price index. These reports could indicate whether fears of stubbornly high inflation and a stagnating economy are warranted. Federal Reserve Chair Jerome Powell recently stated that the central bank remains closer to cutting rates than raising them, even if inflation has been hotter than expected this year.

The ASX's cautious sentiment aligns with the muted trading seen on Wall Street overnight, where the S&P 500 edged down less than 0.1% , the Dow Jones slipped 0.2%, and the Nasdaq composite rose 0.3%. As the federal budget and US inflation readings unfold, investors will be keenly assessing the implications for monetary policy and the broader economic outlook.

Key Takeaways

  • Australian stock market slips 0.4% ahead of federal budget release and US inflation data.
  • Federal budget and US inflation data to impact monetary policy and economic outlook.
  • GUD Holdings soars 12.1% after issuing bullish trading update.
  • Federal budget expected to include cost-of-living relief measures and $9.3 billion surplus.
  • US inflation data to be released this week, influencing Federal Reserve's rate decisions.