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The RBA meeting minutes were released yesterday hinting at the potential for further rate hikes to come, possibly taking the nation’s cash rate to 4.60%, as the outlook for price pressures to become embedded raises concerns for the RBA especially if wages continue rising against stagnant productivity output. Stagnant productivity was a key inclusion in the RBA meeting minutes as members discussed the importance of growing productivity amid output per hour worked not increasing over the past 3 years, hence leading to GDP data growth actually worsening in Q1FY23.
In previous months, investors have been particularly responsive on the share market to hawkish comments from the RBA, however yesterday bucked the trend with the key index closing higher in the likelihood that investors have already factored in the probability of further rate hikes to come.
The ASX closed 0.86% higher yesterday, extending the ASX rally of late into a 7th straight session, buoyed by a surge in energy stocks with the sector closing just shy of 2% higher on Tuesday.
In Australia, retail stocks took another hit yesterday after Best & Less (ASX:BST) downgraded profit guidance by 65% as the consumer discretionary sector as a whole feels the brunt of declining consumer spend. The company now expects net profit between $3.6m and $4.2m in H2FY23, down from the initial guidance issued of $10m to $12m.
In China, the People’s Bank of China cut two more lending rates on Tuesday for the first time in 10-months in another bid to aid recovery post-pandemic in the world’s second largest economy. The Chinese central bank cut the one-year prime loan rate by 10 basis points, and also trimmed the 5-year loan prime rate by 10 basis points.
Over in New York on Tuesday, stocks are trading lower on the first trading session of the week on Wall St as the recent lengthy rally took a slight breather ahead of Federal Reserve Chair Jerome Powell’s congressional testimony. The Dow Jones fell 0.72% on Tuesday while the S&P500 lost 0.47% and the Nasdaq declined 0.16%. On the earnings front, FedEx reports FY23 results after the closing bell on Tuesday. Adding to investor uncertainty was homebuilding projects data in the US out for May showing a surge in single-family homebuilding projects, by the most in more than three decades, according to Reuters.
In Europe, markets closed lower across the board on Tuesday as investor sentiment remains cautious particularly following recent data from China and the lacklustre return to full operational capacity in the region weighing on global economies. The STOXX600 fell 0.6% on Tuesday, Germany’s DAX fell 0.55%, the French CAC lost 0.27% and, in the UK, the FTSE100 lost 0.25%.
Oil prices have been weaker this week on concerns over China’s economic recovery after a number of large banks cut their forecasts for China’s 2023 economic growth, or GDP after data for May out last week showed the post-pandemic recovery is much slower and weaker than first anticipated.
What to watch today: