The Australian share market will today respond to the Abbott Government’s Federal Budget following its release last night. The SPI is pointing to a steady start after European markets moved higher and Wall Street closed mixed but remained near record highs.
While there is no major local economic news scheduled for today Commonwealth Bank of Australia
(ASX:CBA) is due to release its quarterly trading update and full year results are expected from CSR Limited
(ASX:CSR).
The banking sector will be impacted by heavyweights Macquarie Group Limited
(ASX:MQG), National Australia Bank
(ASX:NAB) and Westpac Banking Corporation
(ASX:WBC) trading ex-dividend today.
US economic news
Consumer spending rose less than expected last month. The Commerce Department has reported American retail sales edged up just 0.1 per cent in April, down from expectations of a 0.4 per cent gain.
Global markets
After hitting records on Monday Wall Street closed mixed over Tuesday’s session in which the S&P 500 hit 1,900 for the first time: The Dow Jones Industrial Average added 20 points to close at 16,715, the S&P 500 added 0.8 points to close at 1,897 and the Nasdaq lost 14 points to close at 4,130.
European markets ended higher on Tuesday amid speculation Germany’s central bank could be considering extra stimulus measures from the European Central Bank: London's FTSE 100 gained 21 points, France's CAC 40 gained 11 points and Germany's DAX gained 52 points.
Asian markets closed mixed yesterday while Japan’s Nikkei climbed 2 per cent: Japan’s Nikkei gained 276 points, Hong Kong’s Hang Seng lifted 91 points but China’s Shanghai Composite dipped 2 points.
Records on Wall Street boosted the Australian share market 0.9 per cent yesterday ahead of the Federal Budget’s release: The S&P/ASX 200 Index advanced 49.8 points to finish at 5,498. On the futures market the SPI is pointing 1 point higher.
Currencies
The Australian dollar rose $US0.05 in response to the budget and at 7:30am was buying $US0.9358, 55.63 Pence Sterling, 95.71 Yen and 68.31 Euro cents.
Economic news
The government has laid out a path to return to surplus. Following a projected deficit of $49.9 billion in the current financial year the Abbott Government’s first Federal Budget has forecast a budget deficit of $29.8 billion in the following financial year, narrowing to $17 billion in fiscal 2016 and a projected surplus by the end of the decade.
Treasurer Joe Hockey’s maiden budget has revealed a series of fiscal tightening measures to be implemented across health and social services, public service, committees and councils.
A budget levy on high-income earners is also set to be introduced which will see incomes of more than $180,000 taxed from July 1, 2014 until June 30, 2017 to raise about $3 billion.
Banks respond to budget
ANZ Banking Group’s
(ASX:ANZ) Chief Economist Warren Hogan says the Federal Budget’s forecast deficit of $30 billion for 2014-15 was in line with the bank’s expectations. Mr Hogan highlighted the budget’s major policies as the deficit reduction levy, petrol excise, significant spending cuts and tightening of welfare eligibility. Looking forward Mr Hogan says confidence impacts will be key and has forecast interest rates to remain on hold for some time. Shares in ANZ Banking Group rose 0.67 per cent before the Federal Budget’s release to close at $32.90 on Tuesday.
National Australia Bank Limited’s
(ASX:NAB) Chief Economist Alan Oster has also questioned what impact the budget will have on confidence. Mr Oster says tax and petrol price rises alone should not be enough to stall the economy however confidence effects are hard to judge. Ahead of the budget NAB’s monthly business survey showed business confidence rose to long run average levels last month, despite talk of a hard and tough budget. Shares in National Australia Bank rose 0.94 per cent before the Federal Budget’s release to close at $34.50 on Tuesday.
Ex-dividends
BT Investment Management Limited
(ASX:BTT) paying a 16 cent 35 per cent franked dividend
Macquarie Group Limited
(ASX:MQG) paying a $1.60 dividend 40 per cent franked dividend
National Australia Bank
(ASX:NAB) paying a 99 cent fully franked dividend
United Overseas Australia Limited
(ASX:UOS) paying a 2 cent unfranked dividend
Westpac Banking Corporation
(ASX:WBC) 90 cent fully franked dividend
Commodities
Gold has dropped $1.00 to $US1,294.80 an ounce for the June contract on Comex.
Silver has firmed $0.004 to $19.55 for May.
Copper has eased $0.01 to $3.14 a pound.
Oil has added $1.11 to $US101.70 a barrel for June light crude in New York.
