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Yesterday the market finished lower for the second straight trading session, down 0.4% or around 30 points. The market was steady yesterday while awaiting the RBA’s interest rate decision. And the central bank raised the cash rate by 25 basis points to 0.35%. The market was waiting to see whether rates would be lifted or if the RBA would hold off for another month, however it was wildly expected that the RBA would lift the cash rate by 15 basis points, so the rise of 25 basis points was greater than market consensus, and it is also the first rate hike in 11 years. Now, inflation has been rising at its fastest pace in 20 years, so the RBA believes it’s an appropriate time to begin the process of normalising monetary conditions, flagging that there is also evidence that wage growth is picking up. Following the announcement, the market had an almost instant reaction, dropping significantly, however the market then lifted again about 30 minutes after the announcement.
Sectors wise, real estate took the biggest hit yesterday, while tech gained the most. These are the two sectors however, that are more likely to pull back, with the cash rate hike
Looking at the ASX200 leaderboard, Magellan Financial Group (ASX:MFG) was the best performer, gaining 5% after reports that Nikki Thomas, formally a fund manager at MFG, is likely to permanently replace Hamish Douglas as CIO. And the company’s new chief executive is expected to be appointed next month. Tech stocks were also higher yesterday with Zip (ASX:ZIP), Appen (ASX:APX) and Block (ASX:SQ2) taking the lead.
Overseas, European markets finished higher, after closing lower a day earlier, after a sudden “flash crash” in the Sweden’s Stockholm OMX 30 index, which fell 8% at one point, before rising again and regaining most of those losses. There was also weak economic data from China and Germany, however European markets still closed in the green. US equities also closed higher, ahead of the Federal Reserve’s policy decision tonight. It is widely expected that the Fed will tonight raise rates by 50 basis points. The Dow Jones closed up 0.2%, the S&P500 up 0.5% and the Nasdaq up 0.2%.
What to watch today: