‘We need a clear victory': Why the ASX doesn't want a minority government

Sydney Morning Herald

02-05-2025

The laggards
Afterpay owner Block (previously known as Square) shares lost 26.7 per cent] of its value after the digital payments juggernaut – also listed on the New York Stock Exchange – revealed first-quarter results that undershot expectations and lowered its profit outlook.
Corporate Travel Management has shed 10 per cent and Zip Co has tumbled 4.9 per cent.
'We revise down our estimates to incorporate tariff uncertainty,' said Citi Research analyst Samuel Seow of Corporate Travel Management in a note, although it retained its buy rating.
The lowdown
How much is Australia's sharemarket affected by domestic politics? AMP chief economist Shane Oliver and Ten Cap co-founder and lead portfolio manager Jun Bei Liu both said that there was not enough difference between Labor and Coalition governments to significantly shake the market on either outcome.
'If we have a minority government, then it becomes difficult. Nothing gets done. This probably would be the worst-case scenario,' said Liu. 'No policy gets done, then businesses don't want to spend, then obviously you have the confidence hit.'
Investors see the differences between the two main parties as 'quite minor', with Trump's tariffs to remain the dominant factor moving markets, said Oliver.
'If the Coalition were to win, you might see a slight positive reaction, because the Coalition [is seen as] more business-friendly than the Labor Party. But I think it would be trivial in the grand scheme of things.'
The 'less sensible, less rational' policies of the Whitlam government depressed the market in the 1970s, but by contrast, the Hawke-Keating government's deregulation initiatives oversaw the 'strongest period for shares historically', Oliver said.
Conversely, investors might be spooked by a minority Labor government that would cut a deal with the Greens, which would be seen as 'dragging the Labor Party to the left' and as less business-friendly, he added. 'The market will be particularly affected by [that].'
On the economic front, retail sales rose just 0.3 per cent over March, indicating that the consumer spending recovery has been weak, and undershooting most economist expectations, indicated AMP economist My Bui.
'The stagnation in March retail volumes suggests that the recovery will be gradual and limited, with most households still experiencing the impacts of the faster cumulative rise in price levels over the past few years (compared to wages),' she said in a note.
'There are now even more arguments for the RBA to resume its cutting cycle in May.'
S&P Global Ratings has lowered its GDP growth forecasts for 'most' countries and raised its US inflation forecast. It is now predicting 1.7 per cent growth to Australian GDP for 2025.
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'A seismic and uncertain shift in US trade policy has roiled markets and raised the spectre of a global economic slowdown,' the S&P global economists stated in a research note.
'We see a material slowdown in growth, but do not foresee a US recession at this juncture.'
Overnight, Microsoft and Meta Platforms led Wall Street higher while Amazon and Apple released their results after the closing bell.
The S&P 500 rose 0.6 per cent for an eighth-straight gain, its longest winning streak since August. The Dow Jones added 83 points, or 0.2 per cent, and the Nasdaq composite climbed 1.5 per cent.
Apple's uncertain outlook sent shares sliding 3.8 per cent in after-hours trading. Amazon shares are 3.2 per cent lower in after-hours trading.
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Microsoft rallied 7.6 per cent. Meta, the parent company of Facebook and Instagram, also topped analysts' targets for revenue and profit in the latest quarter. It said AI tools helped boost its advertising revenue, and its stock climbed 4.2 per cent.
They're two of the most influential stocks within the S&P 500 and other indexes because of their massive sizes, and they weren't alone. The S&P 500 is back to within 9 per cent of its record set earlier this year, after briefly dropping nearly 20 per cent below the mark.
Still, plenty of uncertainty remains about whether President Donald Trump's trade war will force the economy into a recession.
The uncertainty has already shown up in surveys of consumers, which say pessimism is shooting higher about where the economy heading. On Thursday, a couple of reports about the economy came in mixed, following up on several recent updates that suggested it's weakening.
The fear on Wall Street is for a possible worst-case scenario called 'stagflation,' where the economy stagnates yet inflation remains high. The Federal Reserve has no good tools to fix both such problems at the same time. If the Fed were to try to help one problem by adjusting interest rates, it would likely make the other worse.
Tweet of the day
Quote of the day
'It's a heist.'
That's an executive associated with furious investors who raged against a $14 billion deal between Australian building products giant James Hardie and US group Azek.
The company's stock plunged within hours, but it would take weeks for the group to shred more than $6 billion of shareholder wealth as its investors woke up to the full horror of a deal that would transform James Hardie in ways they had not imagined.
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