Pre-Open Data
Key Data for the Week
- Monday – AUS – MI Inflation fell to 3.4%, from 4.0% last month.
- Monday – US – Markit Manufacturing PMI was 59.2, up from 58.8 in March.
- Tuesday – AUS – RBA Cash Rate Decision
- Tuesday – EUR – Unemployment Rate
Australian Market
The Australian sharemarket closed lower yesterday ahead of the Reserve Bank of Australia’s interest rate meeting today. The local sharemarket followed a weak lead from the US to drop 1.2%, with the Information Technology sector the hardest hit.
The Information Technology sector lost 1.4%, as the prospect of increased interest rates weighed on investor sentiment. Afterpay’s parent company, Block, conceded 2.2%, while buy-now-pay-later competitor, Sezzle, slipped 2.3%.
The increased COVID lockdowns in China again weighed on the Materials sector, as it lost 0.7%. Losses were experienced by the lithium miners, as Pilbara Minerals lost 6.7% and Allkem slipped 2.8%. Among the major miners, BHP lost less than 0.1%, while Fortescue Metals and Rio Tinto added 0.1% and 0.7% respectively.
Travel stocks were among the best performers yesterday. Qantas announced an aircraft order for 12 planes capable of flying directly from Australia to New York and London. As a result, the company added 2.8%. Of the other travel stocks, Webjet lifted 1.2% and Flight Centre rose 1.8%.
The Australian futures market points to a 0.34% fall today.
Overseas Markets
European sharemarkets closed lower on Monday, as automaker and energy stocks led declines. Automakers continue to be impacted by supply chain issues that have stemmed from COVID and the Russia-Ukraine conflict. As a result, BMW shed 1.1% and Volkswagen dropped 1.2%, while Porsche fell 2.6%. The major oil providers also declined; Royal Dutch Shell conceded 0.6% and TotalEnergies lost 0.5%. By the close of trade, the STOXX Europe 600 lost 1.5% and the German DAX closed down 1.1%, while the UK’s FTSE 100 was closed.
US sharemarkets finished higher overnight, in what was a mixed session of trade. The Information Technology sector enjoyed gains after being heavily weakened on Friday; Netflix rebounded 4.8%, while Microsoft lifted 2.5% and Alphabet was up 1.9%. Semiconductor providers also increased, as NVIDIA added 5.3% and Taiwan Semiconductor Manufacturing Co. lifted 1.3%. By the close of trade, the Dow Jones added 0.3% and the S&P 500 rose 0.6%, while the NASDAQ jumped 1.6%.
CNIS Perspective
This week sees all eyes focused on global central banks, with key interest rate decisions from the US Federal Reserve, the Bank of England (BoE) and the Reserve Bank of Australia, where expectations are for increases across the board.
In the US, it is now all but certain the Fed will hike rates by 50 basis points at the conclusion of its two-day meeting on Wednesday, which is now priced into the market, with a small risk of the US even raising 75 basis points. In the UK, a further 25 basis points rise is expected on Thursday, which would see the BoE raise at four of the past five meetings.
Here in Australia, there is little reason for the Reserve Bank to hold fire on interest rates, with last week’s inflation data hitting 5.1% likely to be enough to encourage Dr Lowe to pull the trigger on raising rates today.
Interest rate markets have attached a 78% probability of a 15-basis point move in the Official Cash Rate today, which, if it eventuates, would be the first rise in rates since November 2010.
One thing is for sure, rates are rising, whether the Reserve Bank decides to push the button on a lift today, or let the election be decided before addressing rates in June. This will be confirmed at 2:30pm.
However, if we look back just six months, this is a far cry from the RBA’s focus on not raising rates until 2024. It begs the question; how did they miss the mark by nearly two years?
Should you wish to discuss this or any other investment related matter, please contact your Wealth Management Team on (02) 4928 8500.
Disclaimer
The material contained in this publication is the nature of the general comment only, and neither purports, nor is intended to be advice on any particular matter. Persons should not act nor rely upon any information contained in or implied by this publication without seeking appropriate professional advice which relates specifically to his/her particular circumstances. Cutcher & Neale Investment Services Pty Limited expressly disclaim all and any liability to any person, whether a client of Cutcher & Neale Investment Services Pty Limited or not, who acts or fails to act as a consequence of reliance upon the whole or any part of this publication.
Cutcher & Neale Investment Services Pty Limited ABN 38 107 536 783 is a Corporate Authorised Representative of Cutcher & Neale Financial Services Pty Ltd ABN 22 160 682 879 AFSL 433814.
