Pre-Open Data
Key Data for the Week
- Monday – EUR – Gross Domestic Product advanced 0.3% in the December quarter.
- Monday – AUS – MI Inflation increased 0.4% in January, after a 0.2% decrease in December.
- Tuesday – AUS – RBA Cash Rate Decision
- Tuesday – AUS – Retail Sales
- Tuesday – US – Markit Manufacturing PMI
Australian Market
The Australian sharemarket closed 0.2% lower yesterday, which marked January as the market’s worst month in almost two years. Investors still cautiously await any movement from the Reserve Bank to see if they will flag higher interest rates this year.
The Financials sector was the worst performer, as all four big banks closed the session lower. ANZ was the hardest hit, as it fell 3.4%, while Westpac, NAB and Commonwealth Bank all dropped between 1.6% and 2.0%. Fund managers bucked the downward trend, as Magellan Financial Group added 0.3% and Australian Ethical Investment lifted 4.0%.
Mixed performances among the major miners led to a 0.5% decrease in the Materials sector. IGO conceded 0.8% after the company’s first half report missed earnings expectations. BHP shed 1.2% and Rio Tinto lost 1.9%, while Fortescue Metals added 2.2%.
The Information Technology sector was the best performer on the ASX, as the sector is likely to be influenced by the current reporting season in the US. Block, Afterpay’s parent company, jumped 8.1%, while accounting software provider, Xero, added 2.8%.
The Australian futures market points to a 0.54% gain today, driven by stronger overseas markets.
Overseas Markets
European sharemarkets gained overnight, lifted by the Information Technology and the Financials sectors. Semiconductor producers, ASML and Infineon Technologies added 5.0% and 5.2% respectively. By the close of trade, the STOXX Europe 600 added 0.6% and the German DAX lifted 1.0%, while the UK’s FTSE 100 was relatively flat.
US sharemarkets also advanced on Monday. The ‘big tech’ companies enjoyed gains; Amazon added 3.9%, Apple lifted 2.6% and Alphabet gained 1.8%. By the close of trade, the NASDAQ rose 3.1% and the S&P 500 added 1.9%, while the Dow Jones closed up 1.1%.
CNIS Perspective
This week will be action-packed for the Reserve Bank of Australia (RBA), where we expect to gain a clearer indication of where Australia is heading with regards to stimulus and interest rates. Today sees the first RBA meeting of the year. On Wednesday Governor Philip Lowe will address the National Press Club and the quarterly Statement on Monetary Policy will be released on Friday.
At today’s meeting it is widely expected the RBA will hold interest rates at 0.1%, but pressure is likely building for hikes later this year. However, this meeting will see a full review of its quantitative easing program take place, with the last adjustment being a tapering of bond purchases to $4 billion per week, from $5 billion, in September last year.
In December, Governor Lowe gave himself three potential options for this meeting, with the outcome dependant on data received between December and February:
- Tapering purchases further and reviewing the program again in May,
- Tapering purchases further and concluding the program in May, or
- Ceasing purchases altogether in February.
Since then, inflation reached 3.5% over the year to the December quarter, above the RBA’s 2-3% target band, while the unemployment rate came in at just 4.2% in December, its lowest level since 2008. Additionally, the US Federal Reserve announced it will accelerate its exit from its own quantitative easing program.
With all this now known, it’s hard to see the RBA electing for ‘option one’ at the meeting, favouring a more aggressive stance today.
2022 will be all about a global unwinding of stimulus added to the economy over the past two years, with some major moves in doing so likely to begin at today’s RBA meeting, and a fast-paced normalisation of monetary policy very much on the cards.
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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