Proactive Investors
Published Nov 06, 2023 09:16
Updated Nov 06, 2023 09:30
The morning catch up: ASX to edge higher ahead of Tuesday’s RBA rate decision
The local market finished higher on Friday and the ASX is expected to inch higher again today. However, this week will see a subdued start ahead of ‘the race that stops the nation’ and the Reserve Bank of Australia (RBA)’s rates decision tomorrow afternoon.
ASX futures finished just 14 points (0.2%) higher on Friday.
The best-performing sectors last week were the Real Estate (6.88%), IT (4.51%) and Healthcare sectors 4.30%). On the flipside, Utilities (-4.63%), Energy (-3.50%) and Consumer Staples (-0.12%) sectors finished the week in negative territory.
IG Markets analyst Tony Sycamore said, “The key economic event in Australia this week will be Tuesday's RBA Interest Rate meeting. Currently, the rates market is assigning a 50% probability of a 25bp rate hike from the RBA to 4.35%.
"Given the political debate around whether Q3 inflation data represented a 'material' change, it will be a close call. For the record, we expect the RBA to raise rates by 25bp on Tuesday.”
In the US, the S&P 500 marked its best weekly performance since November 2022.
“US equity markets ripped higher and bond yields extended their post-FOMC sell-off after Friday's soft non-farm payrolls report," Sycamore said
"Within the details, the US economy added 150,000 jobs in October, falling from 336,000 in September. The unemployment rate increased to 3.9%, the highest since January 2022, and wage growth increased by 0.2% over the month, less than the 0.3% expected.
“Combined with last week's soft ISM data (Manufacturing and Services) and more cautious FOMC, the rates market is pricing in a 25bp rate cut in June next year, with 100bp of rate cuts priced in for 2024.”
What happened last week?
Here’s what we saw (source Commsec):
US markets
Rallied on Friday as signals of cooling in both the US labour market and services sector reinforced the idea that the US Federal Reserve may be done with interest rate hikes.
A big fall in US government bond yields and the release of mostly solid earnings reports also boosted sentiment.
Fintech firm Block jumped 10.7% after raising its annual adjusted profit forecast. Expedia (NASDAQ:EXPE)shares surged 18.8%, a day after the vacation booking platform delivered stronger-than-expected earnings for the third quarter.
Media conglomerate Paramount Global climbed 15.4% after reporting a third-quarter earnings beat. But Apple (NASDAQ:AAPL) fell by 0.5% on the day after its sales forecast for the holiday quarter was short of expectations.
European markets
Were mixed on Friday.
Rate-sensitive real estate stocks rose by 3.1% as signs of an end to monetary policy tightening by major central banks boosted sentiment. Energy shares fell 2.2%, tracking oil prices lower.
Currencies
Were stronger against the US dollar in European and US trade.
Commodities
Global oil prices fell more than 2% on Friday as supply concerns driven by Middle East tensions eased, while US jobs data raised expectations the US central bank could be done hiking interest rates.
Base metal prices rose on Friday as the US dollar weakened.
On the small cap front
The S&P/ASX Small Ordinaries was 1.28% higher to 2,658.30.
It has been steady on the news front this morning. You can read about the following and more throughout the day.
Read more on Proactive Investors AU
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Written By: Proactive Investors
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