Pre-Open Data
Key Data for the Week
- Monday – AUS – MI Inflation climbed 1% in May, and 4.8% for the year.
- Tuesday – AUS – Interest Rate Decision
- Tuesday – US – Trade Balance
Australian Market
The Australian sharemarket closed lower on Monday, down 0.5%, as investors shift their focus to the Reserve Bank’s meeting today. The majority of sectors closed in the red yesterday, in what was a light day of trading.
The Information Technology sector was the main laggard on the local index, as it fell 1.6%. Payment services provider, Tyro Payments, dropped 8.4%, while artificial intelligence provider, Appen, lost 3.3%. Buy-now-pay-later providers also lost ground; Block and Zip both conceded 3.2%.
Magellan Financial Group led the losses in the Financials sector to fall 13.9%, as the company announced its funds under management had dropped 5.3% in the past month. The big four banks were also all lower, with ANZ the weakest performer, down 0.8%. Commonwealth Bank and NAB both conceded 0.5%, while Westpac closed the session 0.3% lower.
The Energy sector bucked the downward trend to close up 2.1%, as a result of the increasing price of oil. Woodside Energy led the gains, up 3.2%, while Santos and Beach Energy added 2.0% and 1.4% respectively.
The Australian futures market points to a relatively flat open today.
Overseas Markets
European sharemarkets closed higher overnight, as the Materials sector benefited from a further decrease in COVID cases in China. As a result, Rio Tinto added 3.7% and Glencore rose 1.6%. The Financials sector was also higher; Santander and Deutsche Bank both lifted 2.5%, while Barclays gained 2.3%. By the close of trade, the STOXX Europe 600 added 0.9% and the German DAX rose 1.3%, while the UK’s FTSE 100 lifted 1.0%.
US sharemarkets were also slightly higher on Monday. Amazon led the gains in the Information Technology sector, up 2.0%, after the company completed a 20 for 1 share split. Among the other technology stocks, Alphabet lifted 2.1% and Apple climbed 0.5%, while PayPal Holdings closed the session 0.3% higher. By the end of trade, the Dow Jones closed relatively flat, while the S&P 500 added 0.3% and the NASDAQ lifted 0.4%.
CNIS Perspective
Today we expect to see the Reserve Bank of Australia (RBA) deliver their second consecutive month of interest rate hikes.
While at the very least we expect to see the cash rate hit 0.60% today, the cash rate futures suggest there is a 70% probability for a larger 40 basis points rate hike, which would bring the cash rate to 0.75%, and back in line with its more conventional policy target points.
One thing to note however, is that reserve banks around the world started the year using a wait and see mentality for more data before raising rates, while at the same time the delay has let inflation bubble away under the surface and we are seeing a game of catch-up on inflation occur.
Right now, Australia’s inflation rate sits at 5.1%, much lower than that of our US (8.3%), European (8.1%) and even New Zealand (6.9%) peers, however still rising.
If there is ever a time for the RBA to be more aggressive on interest rates, it’s now, early in the rising cycle, before a more prolonged rate rising period is required.
Should you wish to discuss this or any other investment related matter, please contact your Wealth Management Team on (02) 4928 8500.
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