Australian equities have started the day lower, following indications of global stock markets after the US occupation report on Friday indicated that the Federal Reserve is likely to continue on an aggressive path of tightening monetary policy to slow inflation.
Key points:
- The RBA raised interest rates in May for the first time in a decade
- Wall Street shares fell lower on Friday after the U.S. occupation report
- Oil prices are higher as OPEC expects production to rise
The RBA is expected to raise interest rates tomorrow and the economist predicts that rates will rise by 25 to 50 basis points.
According to RateCity, if the RBA raises the cash rate by 0.25 percentage points, the average homeowner with $ 500,000 debt and the remaining 25 years will see their repayments increase by $ 66 more.
The technical assumptions in the RBA board’s minutes suggest that the cash rate could rise to 1.75 per cent by the end of the year and reach 2.5 per cent by the end of 2023.
If that happens, the same borrower with a loan balance of $ 500,000 could see his monthly repayments increase by a total of $ 652 a month by Christmas next year.
“The board may follow a standard 0.25 percentage point increase, but there is a good chance it will be more forceful,” said RateCity research director Sally Tindall.
“With petrol and grocery prices continuing to rise, the case for a 0.40 percentage point rise is strong.
“Central banks around the world are struggling to beat inflation, and the Reserve Bank of Australia doesn’t want to be one of them. The council will want to cut it from the start.”
Space to play or pause, M to mute, left and right arrows to search, up and down arrows for volume. Clock time: 2 minutes 46 seconds 2 m 46 s Why do big banks raise interest rates more aggressively than the RBA?
The ASX 200 was down 20 points, or 0.3%, to 7,212 at 10:09 AM.
At the same time, the Australian dollar was up 72.10 US cents.
Among the worst openings were Zip (-4.4pc), Magellan (-4.1pc) and Block (-4pc).
However, Whitehaven gained 1.9%, Beach Energy advanced 1.5% and Woodside increased 1.6%.
US employment report exceeds expectations
Global stock markets fell on Friday.
The data showed that the US economy generated more jobs than expected in May, indicating that the Federal Reserve is likely to continue raising interest rates in its effort to curb inflation.
The U.S. Department of Labor’s employment report showed that the U.S. economy added 390,000 jobs in May, with the unemployment rate remaining stable at 3.6% for the third month. consecutive, surpassing most analysts ’estimates.
Traders hoped the jobs report would show stronger signs of weakness in the U.S. economy that would help persuade the Fed to soften its position on inflation and interest rates to prevent it from triggering a recession.
“It was a general strength, with the exception of retail, and the economy on the employment front continues to advance,” said Josh Wein, portfolio manager at Hennessy Funds in Chapel Hill, North Carolina.
“The Fed, unfortunately, still needs to destroy some demand and will continue to do so at least during the next meetings with 50-point rate hikes.”
The MSCI Global Equity Index, which tracks stocks in 50 countries, fell 1.11%.
The pan-European STOXX 600 index also fell 0.26%.
On Wall Street, the top three indices were led down by sales in the technology, consumer discretionary, communications services, financial and industrial sectors.
The Dow Jones Industrial Average fell 0.98% to 32,923.57, the S&P 500 lost 1.57% to 4,111.41 and the Nasdaq Composite fell 2.46% to 12,013.45.
“Part of the rise (in stocks) lately has been due to the Fed acknowledging that in the fall they could reassess and perhaps pause,” Wein said.
“But the market is recovering some of its previous losses and basically saying this is off the table.”
Oil prices rose, driven by expectations that OPEC’s decision to increase production targets slightly more than expected will not affect much adjusted global supply and rising demand as demand rises. China eases restrictions related to the COVID-19 pandemic.
Brent crude was up, trading at $ 121.41 a barrel at 10:07 a.m. AEST.
ABC / Reuters
Posted 1 hour 1 hour ago Monday, June 6, 2022 at 12:37 AM, updated 43 minutes ago 43 minutes ago Mon. June 6, 2022 at 1:08 p.m.