Australia’s trade surplus hit a record high in May, driven by higher prices of coal, while imports suggested consumer demand is strong as the country continues to open.
The surplus increased to $15.97 billion, surpassing economists’ forecast of $10.3 billion. Exports soared 9.5 per cent and imports jumped 5.8 per cent in May, while exports are up 38.1 per cent on a year ago and imports are up 31.4 per cent on a year ago. Rural goods like meat and wool rose by 3.6 per cent, non-rural goods like coal, oil, and gas added 9 per cent and gold rose 71 per cent, according to the Australian Bureau of Statistics.
The economy has recorded monthly trade windfalls for 53 straight months, that is, nearly 4.5 years. This was due to the sales of iron ore and coal, largely to China. Liquefied natural gas and soft commodities like wheat also added to the surplus since Russia’s incursion into Ukraine on February 20 this year.
The figures will be well received by the newly appointed Treasurer, Dr Jim Chalmers. Dr Chalmers is set to release the first budget in October after flagging a path to reduce public debt. The country appears to be on track. According to the Minister for Finance, Senator the Hon Katy Gallagher, the underlying cash balance for the financial year to 31 May 2022 was a deficit of $33.4 billion, which is $27.1 billion lower than the 2021-22 Revised Budget profile deficit of $60.5 billion.
However, overnight, iron ore has slumped to a 2022 low on fears of China’s zero-Covid policy and the rise of new cases. Met coal slid to a 10-month low, copper hit an almost 20-month low and gold reached a new nine-month low. The question that weighs on investors is whether the momentum of the 53-straight month run will come to an end, amid fears of a global recession and central banks hiking interest rates to curtail multi-year-high inflation.
The US yield curve inverted in the bond market during Wednesday’s session, a sign of a recession in 12 to 24 months. This is when the two-year treasury note is higher than the 10-year. This historical recession indicator hasn’t helped with investor sentiment and feeds further evidence to a global economic slowdown.
Materials sector rebounds, coal fails to rally
Despite the materials sector leading the gains, up 2.5 per cent and offsetting the losses in industrials, information technology, property, and communication services, the main coal miners almost all closed lower.
New Hope Corporation (ASX:NHC) fell 1.4 per cent to $3.44, Coronado Global Resources (ASX:CRN) lost 2 per cent to $1.45 and TerraCom (ASX:TER) closed 4.2 per cent lower at 57 cents. However, Whitehaven Coal (ASX:WHC) bucked the trend, adding 1.7 per cent to $4.73.
Iron ore miners rebounded from eight-month lows. BHP Group (ASX:BHP) added 3.1 per cent to $38.94, Rio Tinto (ASX:RIO) rose 4.1 per cent to $97.18 and Fortescue Metals Group (ASX:FMG) closed 4.4 per cent higher at $17.20.
Banks rose for a second straight session. ANZ Bank (ASX:ANZ) added 1.8 per cent to $22.80 after it sold its investment lending portfolio valued at $715 million to Bendigo and Adelaide Bank (ASX:BEN). Shares in Bendigo closed 1.1 per cent higher at $9.37.
Information technology shares snapped a four-day winning streak. Square (ASX:SQ2) fell 1.3 per cent to $97.33 and Brainchip Holdings (ASX:BRN) closed 3.1 per cent lower at 94 cents.
Meanwhile, the best-performing stock in the S&P/ASX 200 was Imugene (ASX:IMU), closing 9.1 per cent higher at 24 cents. It was followed by shares in Pinnacle Investments (ASX:PNI) and Chalice Mining (ASX:CHN). The worst-performing stock in the S&P/ASX 200 was EML Payments (ASX:EML), closing 9.9 per cent lower at $1.28. It was followed by shares in Lynas Rare Earths (ASX:LYC) and PointsBet Holdings (ASX:PBH).
At the closing bell, the S&P/ASX 200 was 0.8 per cent or 54 points higher at 6,648.
More local economic news
The Australian Industry Group Australian Performance of Services Index dipped to 48.8 in June from 49.2 in May. This is the second straight month of contraction in the services sector.
Payroll jobs rose 0.1 per cent in June from the month before, according to the Australian Bureau of Statistics (ABS). The latest monthly increase of 0.1 per cent compared with a 0.4 per cent fall a year earlier, during Victoria’s fourth lockdown during late May and mid-June 2021.
Drone connectivity expert Elsight (ASX:ELS) has signed a deal with Brazilian-based company Speedbird Aero. Speedbird has built a drone that can deliver packages for commercial, industrial, and healthcare uses. Shares closed flat at 36.5 cents.
The US FDA has awarded Kazia Therapeutics (ASX:KZA) a designation for its treatment for rare brain cancer in children. The designation means that the clinical trial sponsor could be up to receive a priority review voucher if the drug is initially approved for the target disease. Shares closed 0.8 per cent higher at 62.5 cents.
Pushpay Holdings (ASX:PPH) has announced that it has welcomed the Archdiocese of Seattle, Washington, US as a Catholic Customer. The Archdiocese of Seattle will be leveraging ParishStaq, the Company’s integrated technology platform to help parishes and dioceses increase engagement and grow their communities. Shares closed 2.6 per cent higher at $1.19.
AFT Pharmaceuticals (ASX:AFP) and RooLife Group (ASX:RLG) have announced that they have launched a range of AFT’s over the counter pharmaceuticals through their store on the China Cross Border E-Commerce online platform Tmall Global. Further launches are to follow over the next few months. Shares in AFT Pharmaceuticals (ASX:AFP) closed 2.7 per cent lower at $3.24 and shares in RooLife Group (ASX:RLG) closed 20 per cent higher at 1.2 cents.
Pinnacle Investment Management’s (ASX:PNI) 10 affiliates have crystallised performance fees for the year ended 30 June 2022 totalling around $57.1 million, of which $38.3 million crystallised in the second half of the financial year. Shares closed 7.6 per cent higher at $8.18.
Monadelphous Group (ASX:MND) has secured new contracts and contract extensions in the resources and infrastructure sectors totalling around $220 million. Shares closed 0.7 per cent higher at $9.87.
The Dow Jones futures are pointing to a rise of 90 points.
The S&P 500 futures are pointing to a rise of 12 points.
The Nasdaq futures are pointing to a rise of 50 points.
The SPI futures are pointing to a rise of 58 points when the market next opens.
Japan’s Nikkei has gained 1.5 per cent.
Hong Kong’s Hang Seng has lost 0.1 per cent.
China’s Shanghai Composite has gained 0.3 per cent.
Commodities and the dollar
Gold is trading at US$1745.39 an ounce.
Iron ore is 1.7 per cent lower at US$112.35 a ton.
Iron ore futures are pointing to a rise of 3.9 per cent.
Light crude is trading $0.07 lower at US$87.07 a barrel.
One Australian dollar is buying 68.17 US cents.
Sources: Bloomberg, UBS, IRESS