ASX set to fall, Wall Street rises as Tesla rallies; Microsoft cuts 9000 jobs
The S&P 500 was up 0.3 per cent in afternoon trading and on track to set a record for the third time in four days. The Dow Jones was down 50 points, or 0.1 per cent, in mid-afternoon trade, and the Nasdaq composite was 0.8 per cent higher.
The Australian sharemarket is set to retreat with futures at 4.53am AEST pointing to a fall of 24 points, or 0.3 per cent, at the open. The ASX added 0.7 per cent on Wednesday to close at a fresh record. The Australian dollar was steady. It was fetching 65.83 US cents at 5.03am
Treasury yields were mixed in the bond market ahead of Thursday's report, which will show how many jobs US employers created and destroyed last month. The widespread expectation is that they hired more people than they fired but that the pace of hiring slowed from May.
A stunningly weak report released Wednesday morning, though, raised worries that Thursday's report may fall short. The data from ADP suggested that US employers outside the government cut 33,000 jobs from their payrolls last month, when economists were expecting to see growth of 115,000 jobs.
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'Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month,' according to Nela Richardson, chief economist at ADP.
The ADP report does not have a perfect track record predicting what the US government's more comprehensive jobs report will say each month. That preserves some hope that Thursday's data could be more encouraging. But a fear has been that uncertainty around Trump's tariffs could cause employers to freeze their hiring.
Many of Trump's stiff proposed taxes on imports are currently on pause, and they're scheduled to kick into effect in about a week. Unless Trump reaches deals with other countries to lower the tariffs, they could hurt the economy and worsen inflation.
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The Advertiser
an hour ago
- The Advertiser
Stocks dip, dollar slumps as Trump deal deadline looms
Stocks have slipped despite record highs for Wall Street overnight as US President Donald Trump's deadline for trade deals looms. The dollar retraced some of Thursday's gains with US markets already shut for the holiday-shortened week as traders considered the impact of the sweeping spending bill that Trump is expected to sign into law later in the day. The pan-European STOXX 600 index fell 0.6 per cent on Friday, driven in part by losses on spirits makers such as Pernod Ricard and Remy Cointreau after China said it would impose duties of up to 34.9 per cent on brandy from the European Union starting July 5. US S&P 500 futures edged down 0.5 per cent following a 0.8 per cent overnight advance for the cash index to a fresh record closing peak. Wall Street is closed on Friday for the Independence Day holiday. Trump said Washington would start sending letters to countries on Friday specifying what tariff rates they would face on exports to the United States, a clear shift from earlier pledges to strike scores of individual deals before a July 9 deadline when tariffs could rise sharply. Investors were "now just waiting for July 9", said Tony Sycamore, an analyst at IG, with the market's lack of optimism for trade deals responsible for some of the equity weakness in export-reliant Asia, particularly Japan and South Korea. At the same time, Thursday's jobs data showed "the US economy is holding together better than most people expected, which suggests to me that markets can easily continue to do better" from here, Sycamore said. Investors cheered the surprisingly robust jobs report on Thursday, sending all three of the main US equity indexes climbing in a shortened session. Following the close, the House narrowly approved Trump's signature, 869-page bill, which would add $US3.4 trillion ($A5.2 trillion) to the nation's $US36.2 trillion debt, according to the non-partisan Congressional Budget Office. Trump said he expected "a couple" more trade agreements after announcing a deal with Vietnam on Wednesday to add to framework agreements with China and Britain as the only successes so far. US Treasury Secretary Scott Bessent said earlier this week that a deal with India was close. However, agreements with Japan and South Korea, once touted by the White House as likely to be among the earliest to be announced, appear to have broken down. The US dollar rallied overnight, taking it up as much as 0.7 per cent versus a basket of major peers after the robust payrolls data saw traders take any expectations for a Federal Reserve interest rate cut in July off the table. It ended Thursday with a 0.4 per cent rise. On Friday, the US currency gave back a little of those gains, slumping 0.4 per cent to 144.31 yen and sliding 0.2 per cent to 0.7936 Swiss franc. The euro added 0.2 per cent to $US1.1773, while sterling held steady at $US1.3662. The US Treasury bond market is closed on Friday for the holiday, but 10-year yields rose 4.7 basis points to 4.34 per cent while the two-year yield jumped 9.3 bps to 3.882 per cent. Gold firmed 0.4 per cent to $US3,339 per ounce, on track for a weekly gain as investors again sought refuge in safe-haven assets due to concerns over the US's fiscal position and tariffs. Brent crude futures fell seven cents to $US68.73 a barrel, while US West Texas Intermediate crude was last seen flat at $US67.02. Stocks have slipped despite record highs for Wall Street overnight as US President Donald Trump's deadline for trade deals looms. The dollar retraced some of Thursday's gains with US markets already shut for the holiday-shortened week as traders considered the impact of the sweeping spending bill that Trump is expected to sign into law later in the day. The pan-European STOXX 600 index fell 0.6 per cent on Friday, driven in part by losses on spirits makers such as Pernod Ricard and Remy Cointreau after China said it would impose duties of up to 34.9 per cent on brandy from the European Union starting July 5. US S&P 500 futures edged down 0.5 per cent following a 0.8 per cent overnight advance for the cash index to a fresh record closing peak. Wall Street is closed on Friday for the Independence Day holiday. Trump said Washington would start sending letters to countries on Friday specifying what tariff rates they would face on exports to the United States, a clear shift from earlier pledges to strike scores of individual deals before a July 9 deadline when tariffs could rise sharply. Investors were "now just waiting for July 9", said Tony Sycamore, an analyst at IG, with the market's lack of optimism for trade deals responsible for some of the equity weakness in export-reliant Asia, particularly Japan and South Korea. At the same time, Thursday's jobs data showed "the US economy is holding together better than most people expected, which suggests to me that markets can easily continue to do better" from here, Sycamore said. Investors cheered the surprisingly robust jobs report on Thursday, sending all three of the main US equity indexes climbing in a shortened session. Following the close, the House narrowly approved Trump's signature, 869-page bill, which would add $US3.4 trillion ($A5.2 trillion) to the nation's $US36.2 trillion debt, according to the non-partisan Congressional Budget Office. Trump said he expected "a couple" more trade agreements after announcing a deal with Vietnam on Wednesday to add to framework agreements with China and Britain as the only successes so far. US Treasury Secretary Scott Bessent said earlier this week that a deal with India was close. However, agreements with Japan and South Korea, once touted by the White House as likely to be among the earliest to be announced, appear to have broken down. The US dollar rallied overnight, taking it up as much as 0.7 per cent versus a basket of major peers after the robust payrolls data saw traders take any expectations for a Federal Reserve interest rate cut in July off the table. It ended Thursday with a 0.4 per cent rise. On Friday, the US currency gave back a little of those gains, slumping 0.4 per cent to 144.31 yen and sliding 0.2 per cent to 0.7936 Swiss franc. The euro added 0.2 per cent to $US1.1773, while sterling held steady at $US1.3662. The US Treasury bond market is closed on Friday for the holiday, but 10-year yields rose 4.7 basis points to 4.34 per cent while the two-year yield jumped 9.3 bps to 3.882 per cent. Gold firmed 0.4 per cent to $US3,339 per ounce, on track for a weekly gain as investors again sought refuge in safe-haven assets due to concerns over the US's fiscal position and tariffs. Brent crude futures fell seven cents to $US68.73 a barrel, while US West Texas Intermediate crude was last seen flat at $US67.02. Stocks have slipped despite record highs for Wall Street overnight as US President Donald Trump's deadline for trade deals looms. The dollar retraced some of Thursday's gains with US markets already shut for the holiday-shortened week as traders considered the impact of the sweeping spending bill that Trump is expected to sign into law later in the day. The pan-European STOXX 600 index fell 0.6 per cent on Friday, driven in part by losses on spirits makers such as Pernod Ricard and Remy Cointreau after China said it would impose duties of up to 34.9 per cent on brandy from the European Union starting July 5. US S&P 500 futures edged down 0.5 per cent following a 0.8 per cent overnight advance for the cash index to a fresh record closing peak. Wall Street is closed on Friday for the Independence Day holiday. Trump said Washington would start sending letters to countries on Friday specifying what tariff rates they would face on exports to the United States, a clear shift from earlier pledges to strike scores of individual deals before a July 9 deadline when tariffs could rise sharply. Investors were "now just waiting for July 9", said Tony Sycamore, an analyst at IG, with the market's lack of optimism for trade deals responsible for some of the equity weakness in export-reliant Asia, particularly Japan and South Korea. At the same time, Thursday's jobs data showed "the US economy is holding together better than most people expected, which suggests to me that markets can easily continue to do better" from here, Sycamore said. Investors cheered the surprisingly robust jobs report on Thursday, sending all three of the main US equity indexes climbing in a shortened session. Following the close, the House narrowly approved Trump's signature, 869-page bill, which would add $US3.4 trillion ($A5.2 trillion) to the nation's $US36.2 trillion debt, according to the non-partisan Congressional Budget Office. Trump said he expected "a couple" more trade agreements after announcing a deal with Vietnam on Wednesday to add to framework agreements with China and Britain as the only successes so far. US Treasury Secretary Scott Bessent said earlier this week that a deal with India was close. However, agreements with Japan and South Korea, once touted by the White House as likely to be among the earliest to be announced, appear to have broken down. The US dollar rallied overnight, taking it up as much as 0.7 per cent versus a basket of major peers after the robust payrolls data saw traders take any expectations for a Federal Reserve interest rate cut in July off the table. It ended Thursday with a 0.4 per cent rise. On Friday, the US currency gave back a little of those gains, slumping 0.4 per cent to 144.31 yen and sliding 0.2 per cent to 0.7936 Swiss franc. The euro added 0.2 per cent to $US1.1773, while sterling held steady at $US1.3662. The US Treasury bond market is closed on Friday for the holiday, but 10-year yields rose 4.7 basis points to 4.34 per cent while the two-year yield jumped 9.3 bps to 3.882 per cent. Gold firmed 0.4 per cent to $US3,339 per ounce, on track for a weekly gain as investors again sought refuge in safe-haven assets due to concerns over the US's fiscal position and tariffs. Brent crude futures fell seven cents to $US68.73 a barrel, while US West Texas Intermediate crude was last seen flat at $US67.02. Stocks have slipped despite record highs for Wall Street overnight as US President Donald Trump's deadline for trade deals looms. The dollar retraced some of Thursday's gains with US markets already shut for the holiday-shortened week as traders considered the impact of the sweeping spending bill that Trump is expected to sign into law later in the day. The pan-European STOXX 600 index fell 0.6 per cent on Friday, driven in part by losses on spirits makers such as Pernod Ricard and Remy Cointreau after China said it would impose duties of up to 34.9 per cent on brandy from the European Union starting July 5. US S&P 500 futures edged down 0.5 per cent following a 0.8 per cent overnight advance for the cash index to a fresh record closing peak. Wall Street is closed on Friday for the Independence Day holiday. Trump said Washington would start sending letters to countries on Friday specifying what tariff rates they would face on exports to the United States, a clear shift from earlier pledges to strike scores of individual deals before a July 9 deadline when tariffs could rise sharply. Investors were "now just waiting for July 9", said Tony Sycamore, an analyst at IG, with the market's lack of optimism for trade deals responsible for some of the equity weakness in export-reliant Asia, particularly Japan and South Korea. At the same time, Thursday's jobs data showed "the US economy is holding together better than most people expected, which suggests to me that markets can easily continue to do better" from here, Sycamore said. Investors cheered the surprisingly robust jobs report on Thursday, sending all three of the main US equity indexes climbing in a shortened session. Following the close, the House narrowly approved Trump's signature, 869-page bill, which would add $US3.4 trillion ($A5.2 trillion) to the nation's $US36.2 trillion debt, according to the non-partisan Congressional Budget Office. Trump said he expected "a couple" more trade agreements after announcing a deal with Vietnam on Wednesday to add to framework agreements with China and Britain as the only successes so far. US Treasury Secretary Scott Bessent said earlier this week that a deal with India was close. However, agreements with Japan and South Korea, once touted by the White House as likely to be among the earliest to be announced, appear to have broken down. The US dollar rallied overnight, taking it up as much as 0.7 per cent versus a basket of major peers after the robust payrolls data saw traders take any expectations for a Federal Reserve interest rate cut in July off the table. It ended Thursday with a 0.4 per cent rise. On Friday, the US currency gave back a little of those gains, slumping 0.4 per cent to 144.31 yen and sliding 0.2 per cent to 0.7936 Swiss franc. The euro added 0.2 per cent to $US1.1773, while sterling held steady at $US1.3662. The US Treasury bond market is closed on Friday for the holiday, but 10-year yields rose 4.7 basis points to 4.34 per cent while the two-year yield jumped 9.3 bps to 3.882 per cent. Gold firmed 0.4 per cent to $US3,339 per ounce, on track for a weekly gain as investors again sought refuge in safe-haven assets due to concerns over the US's fiscal position and tariffs. Brent crude futures fell seven cents to $US68.73 a barrel, while US West Texas Intermediate crude was last seen flat at $US67.02.
Sydney Morning Herald
2 hours ago
- Sydney Morning Herald
‘Going to be a reckoning': The ticking time bomb in Trump's big beautiful bill
New York: Celebrated historian Sir Niall Ferguson calls it 'Ferguson's Law' – a rule of thumb under which 'any great power that spends more on debt servicing than on defence risks ceasing to be a great power'. In a February paper for the Hoover Institution at Stanford University, where he is a senior fellow, Ferguson explained that in 2024, for the first time in nearly a century, the United States spent a bigger share of gross domestic product paying interest on its debt (3.1 per cent) than it did on defence (3 per cent). And on present assumptions, the Congressional Budget Office (CBO) projects net interest payments will account for nearly double the defence budget by 2050. 'This unpleasant fiscal arithmetic poses a clear and present danger not merely to the US economy, but also to the position of the United States as the world's dominant military power,' Ferguson says. 'It must be a matter of urgent concern for American policymakers to restore an appropriate relationship between spending on debt service and spending on national security.' Enter Donald Trump and his One Big Beautiful Bill. A grab bag of Trump's policy priorities, the bill bounced its way through Congress this week to arrive at the president's desk for signing on Friday, Independence Day (Saturday AEST), in a highly symbolic display of his sway over the Republican Party and indeed the country. Loading It caps an extraordinary two weeks in which Trump bombed Iran, dominated a NATO summit, shepherded a ceasefire between Israel and Iran, won a significant and highly consequential victory in the US Supreme Court, opened a detention centre nicknamed 'Alligator Alcatraz' and, now, will ink his signature piece of legislation. The One Big Beautiful Bill Act (OBBB), which is its official title, has at its centre the permanent extension of Trump's 2017 tax cuts for individuals and businesses, which were due to expire at the end of this year. According to the nonpartisan CBO, those tax cuts contribute the lion's share to a total increase in the budget deficit of $US3.25 trillion ($4.95 trillion) over the next 10 years – $US3.94 trillion including interest. The libertarian Cato Institute think tank, which advocates limited government, said that under what it called 'realistic assumptions' about economic growth, extensions of tax giveaways or delays to spending reform, the bill could actually add more than $US6 trillion to the national debt. Big, beautiful, bonkers? 'The debt burdens in this bill are unwelcome and dangerous,' says Judge Block, a senior fellow at the New York-based Manhattan Institute, a conservative think tank. 'It's one of the more expensive pieces of legislation in modern memory.' The Trump administration, and many Republicans, see it differently. In their view, the bill actually reduces debt as it contains savings measures while mostly rolling over existing tax policy. Otherwise, Americans would be hit with an enormous tax increase. The CBO, on the other hand, bases its calculations off existing law, under which taxes revert to their pre-2017 levels. Block said Republicans could largely justify the 2017 Trump tax cuts because they were paired with significant simplifications of the tax code. That is not the case this time, he said, though there were positive aspects to the OBBB, such as immediate tax write-offs for research and development. 'To a large extent, most of the debt here is coming from giveaways such as the overtime credit, the tax on tips deduction,' he said. 'Those can't really be justified as tax simplification or a means toward economic growth, which makes their deficit-increasing aspect all the more worrying.' Introducing tax deductions for tips and overtime was a major Trump election promise, one he advertised with much fanfare in cities such as Las Vegas. There's a major catch, though: the policy expires at the end of 2028, when Trump leaves office. As Block points out, there are fairly substantial spending cuts in the bill, which Republicans have not always dared reach for in the past. The biggest is a record $US1 trillion cut to Medicaid, which provides health coverage for low-income adults and families. The CBO estimates this will lead to 11.8 million more people living without health insurance by 2034. The White House maintains there are no 'cuts' to Medicaid in the OBBB. Rather, it says the savings come from removing illegal aliens from the program, enforcing work requirements and protecting Medicaid 'for the truly vulnerable'. Medicaid was a focus of a record-breaking speech by the Democrats' leader in the House of Representatives, Hakeem Jeffries, who began before dawn on Thursday local time and spoke for nearly nine hours. Languishing without the numbers in either chamber of Congress, and with Trump stamping his authority on every aspect of American life, the listless Democratic Party was hoping to send a signal to angry voters, even if it was only able to delay the inevitable, with the OBBB passing quickly after Jeffries finally sat down. '[Seventeen] million people just lost healthcare,' posted the Democratic governor of California, Gavin Newsom, within minutes of the bill's passage. '[Eighteen] million kids just lost school meals. Three million Americans just lost food assistance. And $US3.5 trillion was added to the deficit. All for a tax cut for Trump's billionaire donors.' Newsom called it 'the ultimate betrayal'. In New York, young hedge fund manager Spencer Hakimian was also aghast. The 26-year-old, who has built an online following of 150,000 criticising Trump over tariffs, said history had shown debt accumulation is the ruin of empires. 'You can't keep adding debt with no limit. Both parties are wrong about this, it's a complete fallacy,' he said. And it was facetious for the administration to argue that the tax cuts didn't really contribute to debt, Hakimian said. The bill lifts the debt ceiling by another $US5 trillion. 'Why would they be raising the debt limit if they weren't adding to the debt?' The feeling on Wall Street is mixed, Hakimian says, but most people are agnostic. Markets are already at all-time highs, with the US economy defying expectations, unemployment staying low and Trump's tariff threats largely petering out. That matches the assessment of The Economist 's British editor-in-chief Zanny Minton Beddoes, who said the mood among New York financiers at the Aspen Ideas Festival was insouciant, and ambivalent about the debt. 'Call me a European grinch, but I felt I had arrived on planet Pangloss,' she told subscribers in a note after the 'big, beautiful, bonkers' bill passed. 'I worry that Trumponomics 2.0 is eroding the foundations of America's economy in more fundamental ways than many people are willing to admit.' Ticking time bomb Steven Hamilton, an Australian assistant professor of economics at George Washington University, says the debate over how to measure the One Big Beautiful Bill's impact on debt is moot. The point, he says, is that it presumes current policy can go on forever, and 'letting current policy go on forever is nuts'. 'Within 10 years, US debt to GDP will be approaching 130 per cent, which is well above any time in US history, well above World War II and beyond the level anyone really thinks is sustainable,' Hamilton says. 'That's with the debt we have, and what we're planning to do is increase debt by another 25 per cent over the next 10 years. What we actually needed from the bill is a serious fiscal consolidation effort.' Likewise, Block says the bill's savings measures effectively concede Congress is not going to approve any such consolidation, and will simply leave the 'dire' state of US debt in place. Loading Many analysts believe a sovereign debt crisis is a matter of when, not if. About a month ago, JPMorgan Chase chief executive Jamie Dimon said a crack in the bond market was 'going to happen'. Hamilton believes it is coming sooner rather than later. 'At some point in the next 10 years, there is going to be a reckoning where the music stops and the markets say, 'well, we're not going to fund this any more',' he says. 'You cannot keep going along this pathway.' A devaluing of US debt would have dire consequences for the global financial market and for Australia that would eclipse, by far, the 2008 Global Financial Crisis. Even if such a collapse doesn't happen on its own, says Hamilton, the US debt burden leaves it in a precarious position to deal with a crisis, such as a future pandemic, war with China, or some sort of crisis arising from the advent of artificial intelligence technology. 'There are all sorts of things we don't know,' he says. 'We're exposing ourselves to enormous risk.' Much of that risk depends on what happens to interest rates in coming years. Low rates between the GFC and the COVID-19 pandemic made US debt more affordable. That era is now over. Loading Trump has been badgering Federal Reserve chair Jerome Powell for months to lower interest rates, saying it is costing the US government hundreds of billions of dollars a year in interest payments on its debt. But it is the long-term trajectory that matters, and Block says the consequences could be disastrous. 'If those interest rates continue to go up, that could be by far the most drastic threat to the American economy and America writ large,' he says. More than the threat posed by Russia or China? 'I don't think that's an exaggeration.'
News.com.au
3 hours ago
- News.com.au
Criterion: Buy, hold or sell CBA? Investors face their NFY resolution
The CBA clearly is overvalued on conventional metrics, but selling is not as simple as that 'Expensive' stocks can remain so for months – or even years The CBA's worthy peers could be cheaper alternatives Happy New Financial Year (NFY) – a time of quiet reflection on the next fiscal stanza between scrambling for receipts to justify Netflix as a tax deduction. As part of their soul searching, investors may resolve to take profits on shares that have done well. Like the New Year's resolution to drink only on weekends rather than days ending with a 'y', NFY intentions dissipate just as quickly. But there's one decision that won't go away – and its got nothing to do with joining a gym. Should they sell their shares in the Commonwealth Bank (ASX:CBA) after last financial year's shock 48% share romp? With the stock down about 5% over the last week, some investors already have lightened up on the bank, rather than with the barbells. Trapped in a 'virtuous cycle' A chorus of expert voices has decried the CBA is chronically overvalued: mainly the fund managers who sold too soon and trashed their 2024-25 performance. In summary, the world's most expensive bank is such because overseas institutions like Australia. The CBA – also the biggest ASX stock- is the obvious proxy for our great nation. As more instos pile into the CBA, there's more buying because of the need to maintain index weighting. The CBA now accounts for 10% of the ASX200 index. This is all very well until a typical bank-like event – such a housing downturn – disrupts this self-reinforcing loop. In the words of Atlas Funds Management's Hugh Dive: 'it's a virtuous cycle until it isn't'. One pillar, three 'stumps' CBA's $300 billion valuation makes its Four Pillars peers look more like three 'stumps'. On Morgan Stanley's numbers, the CBA trades on an estimated current-year earnings multiple of 29 times, compared with 20.4 times for its Westpac (ASX:WBC), National Australia Bank (ASX:NAB) and Australia and New Zealand Banking Group (ASX:ANZ). This compares with a sector average multiple of 12.5 times over the last decade. Of course, most retail investors hold the banks for their franked dividends. On this note, the banks trade on an average forward yield of 4.8%, or 5.8% grossed up (accounting for the franking). The CBA's yield has declined to a mediocre 2.7% (3.9% grossed up). Put in context, a risk-free 12-month CBA term deposit pays 4%. The case for buying To be fair, the CBA has kept its nose out of trouble – and inarguably it's one of the world's best managed banks. Our 'stronger for longer' housing boom sure does help. 'Expensive' shares can remain so for years. This is evidenced by this year's record-breaking run of radiology imaging play ProMedicus (ASX:PME). Or, globally, AI hero Nvidia. So is the next stop for CBA is $200 per share. Or why not $300? The CBA's valuation could be supported if the Goldilocks economy thesis pans out, with tempering inflation enabling more rate cuts (as is expected). Meanwhile, the other three 'Four Pillars' have taken in turns to court disaster and controversy or lose share in the key home mortgage market. Banking on better returns elsewhere That said, the 'three stumps' are excellent banks by global standards. They also have a solid track record of recovering from despite their whoopsies. For those seeking consistent income, they work on a September balance date so pay their divs at a different time to the June-balancing CBA. Still unconvinced? The non-Big Four banks could be a credible alternative. That said, they may lack the relative prudential strength and have a higher cost of capital. Investors in the out-of-sorts Bank of Queensland (ASX:BOQ) enjoyed a 40% bounce share bounce last financial year, secondly only to the CBA's 49% surge. MyState (ASX:MYS) is an exposure to the gentrifying Tasmania market, as well as the Rockhampton and Bundaberg regions. A pure-play business lender Judo Capital Holdings (ASX:JDO) enjoys higher interest margins than on a mortgage, but its risk managers need to be on top of their game. So far, they have been. PNG bank Kina Securities (ASX:KSL) trades on a PE of eight times and an 8% yield. Perversely for the impoverished island nation, Kina has capital adequacy that would put the Big Four to shame.
