Markets Overview
- ASX SPI 200 futures up 0.5% to 7,801.00
- Dow Average up 0.3% to 39,558.11
- Aussie up 0.3% to 0.6627 per US$
- US 10-year yield fell 4.7bps to 4.4394%
- Australia 3-year bond yield fell 1.1 bps to 3.96%
- Australia 10-year bond yield little changed at 4.33%
- Gold spot up 0.9% to $2,358.38
- Brent futures down 0.7% to $82.75/bbl
Economic Events
- 11:30: (AU) 1Q Wage Price Index QoQ, est. 0.9%, prior 0.9%
- 11:30: (AU) 1Q Wage Price Index YoY, est. 4.2%, prior 4.2%
Stocks in Asia are poised to follow a big tech-led rally in US benchmarks, as investors look to key inflation data later Wednesday for clues on the Federal Reserve’s next steps.
Equity futures for Japan and Australia pointed higher, while those for Hong Kong were little changed with that market closed for a holiday. In the run-up to US consumer price index data, the S&P 500 shrugged off Jerome Powell’s signals that interest rates will be higher for longer and a mixed reading on producer inflation. The report weighed on bond yields and oil.
Underlying US inflation probably moderated in April for the first time in six months, offering some hope that price pressures will start to ease again. Compared with April 2023, the core CPI is projected to rise 3.6%. While the annual increase would be the smallest in three years, it would still be too high to warrant rate cuts.
The S&P 500 rose to around 5,247, just shy of the March 28 closing level of 5,254.35 that would mark its 23rd record in 2024. Treasury 10-year yields fell five basis points to 4.44%, a Bloomberg gauge of the dollar declined for the first time in three days and oil slipped 1.4% in New York while gold rose. The Nasdaq Golden Dragon Index of US-listed Chinese companies slipped from a seven-month high reached Monday.
Other News
Australia plans to introduce a new tax penalty for big companies that try to avoid taxes on royalties in its latest move to crack down on multinationals that it says aren’t paying their fair share.
The proposed new provision would impose a penalty on companies found to have mischaracterized or undervalued their royalty payments in cases where royalty withholding taxes would otherwise apply, according to the government’s latest budget unveiled Tuesday.
The penalty would apply starting in July 2026 to companies that are part of a group with more than $1 billion in annual global turnover, according to the budget, which didn’t disclose further details about the move.
Australia’s Treasury said in a statement that the new penalty and other measures in the budget “will boost the bottom line and make the tax system fairer.”
The proposed new penalty comes after a spate of other moves that Australian authorities have taken against multinationals in recent years, from stricter regulatory enforcement and guidance to new laws and more stringent disclosure requirements.
Much of the authorities’ attention has focused on companies they say are trying to use cross-border transactions involving royalties on the use of their intellectual property, like patents and trademarks, to avoid paying taxes in Australia. The Federal Court of Australia last week heard a closely watched appeal by PepsiCo of a ruling requiring it to pay royalty withholding taxes and which also upheld Australia’s “diverted profits tax,” an existing penalty tax.
The budget also calls for extending the work of an Australian Taxation Office tax-avoidance task force by two years, until mid-2028, with an added A$1.16 billion ($1 billion) in funding to address tax avoidance by large businesses and wealthy individuals.
The budget also discontinues a measure in Australia’s 2022-23 October budget that denies deductions for payments related to intangibles held in tax-haven countries. Those issues are now being addressed via the 15% global minimum tax and Australia’s domestic minimum tax, for which implementing legislation will soon be introduced, Treasury said.
The budget is projected to swing to deficits in fiscal 2025 and 2026, after surpluses in the first two years of the current Labor Party government.
In other tax moves, the budget offers A$7 billion in production tax incentives on critical minerals and A$6.7 billion in renewable-hydrogen tax incentives, both over a decade or more. The proposals are needed “to help Australia succeed and remain an indispensable part of the global economy,” Treasury said.
The budget also calls for tougher tax standards on capital gains for foreign residents starting in 2025, including clarifying and broadening the types of assets on which foreign residents are subject to capital-gains taxes. The moves are expected to bring in a net A$592 million.
(Bloomberg)
