Pre-Open Data
Key Data for the Week
- Tuesday – AUS – RBA Cash Rate Decision – The Official Cash Rate was lifted by 0.25% to 0.35%.
- Tuesday – EUR – Unemployment Rate fell to 6.8% in March, down from 6.9% in February.
- Wednesday – AUS – Retail Sales
- Wednesday – US – FOMC Funds Rate Decision
Australian Market
The Australian sharemarket was relatively stable during the start of trade yesterday, however dropped 0.4% following the Reserve Bank of Australia’s (RBA) interest rate decision. The RBA decided to increase the Official Cash Rate by 0.25%, the first rate rise in over 10 years.
Despite the majority of the banks finishing the session lower, they all rose as the interest rate news was announced at 2:30pm. Westpac added 0.1%, while ANZ, NAB and Commonwealth Bank all dropped between 0.2% and 0.7%. Local fund managers were mixed; Magellan Financial Group lifted 5.0%, while Australian Ethical Investment slipped 0.4%.
The Materials sector lost ground to close the session 1.0% lower. Fortescue Metals conceded 4.8%, while Rio Tinto and BHP dropped 1.5% and 0.7% respectively. Goldminers also slipped; Evolution Mining lost 2.0% and Northern Star Resources shed 0.4%.
The Information Technology sector followed a solid lead from the US to rebound after weakness earlier in the week. Buy-now-pay-later providers, Block and Zip, added 4.6% and 5.0% respectively, while software provider, Altium, rose 1.1%.
The Australian futures market points to a 0.59% gain today.
Overseas Markets
European sharemarkets finished higher on Tuesday, boosted by the Energy and Financials sectors. Despite a slight dip in the price of oil, BP announced a large increase in profit and rose 2.9%, while Royal Dutch Shell added 0.1%. A 5.2% jump in BNP Paribas led the Financials sector higher, as the company benefitted from a surge in trading volumes. Among the other banks, Santander rose 3.0% and ING Groep lifted 2.4%.
By the close of trade, the UK FTSE 100 added 0.2% and the STOXX Europe 600 lifted 0.5%, while the German DAX closed up 0.7%.
US sharemarkets also rose overnight with the Energy sector also the standout following BP’s stellar profit. ConocoPhillips added 3.1% and Exxon Mobil was up 2.1%, while Chevron closed the session 1.7% higher. The Financials sector was again higher as investors anticipate more aggressive rate rises by the Federal Reserve this week. Goldman Sachs added 1.4% and Bank of America lifted 2.7%, while Charles Schwab Corp rose 2.3%.
By the close of trade, the Dow Jones and NASDAQ both added 0.2%, while the S&P 500 closed the session 0.5% higher.
CNIS Perspective
The property market is obviously a prime candidate to be adversely affected by yesterday’s decision by the RBA to raise the Official Cash Rate (OCR) by 0.25%.
What will cushion the blow to the default rate of mortgage holders is the large shift to fixed interest rate mortgages over the past few years. With interest rates flat across the board, new lending transacted at fixed interest rates jumped to 50% of all new lending. A smart move by some!
Mortgage defaults will now feature more prominently on the radar as a leading indicator of financial stress in the economy. It’s been a dormant indicator for many years as rates were falling and remained low.
Bank lending criteria and practices will also come under the microscope, to examine just how diligent banks have been in mortgage lending.
Let’s hope they used higher rates to determine mortgage eligibility and therefore factored in advance the rising interest rates environment.
Should you wish to discuss this or any other investment related matter, please contact your Wealth Management Team on (02) 4928 8500.
Disclaimer
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