ASX flat on RBA day as Wall Street stays in a holding pattern

By Stan Choe and Jessica Yun
Updated

The Australian sharemarket opened flat on Tuesday morning, on the back of a mixed session on Wall Street.

The S&P/ASX200 dipped 0.8 points to 7327.8 just before 1pm AEDT, dragged down by materials stocks. The Reserve Bank will announce its interest rate decision at 2.30pm AEDT.

Wall Street is on its way to a positive start to the week.
Wall Street is on its way to a positive start to the week. Credit:AP

Among the early gainers, Sayona Mining is up 3.2 per cent, followed by Flight Centre and Macquarie Group, up 2.2 per cent and 2 per cent respectively.

Megaport has kicked off the day as the poorest performing player, down nearly 7 per cent. Imugene and Viva Energy were both down 5.7 per cent and 5.3 per cent respectively.

Overnight on Wall Street, stocks were mixed in quiet trading as they stayed in a holding pattern ahead of a potentially big week.

The S&P 500 ticked up by 0.1 per cent to 4,048.42 after coming off its first winning week in the last four. The Dow Jones lost 0.1 per cent and the Nasdaq composite slipped by 0.1 per cent. The ASX rose by 0.6 per cent on Monday.

The stock market has found some footing over the last week after a roller-coaster start to the year where a swift rise gave way to a sharp tumble. At the centre of it all has been high inflation and expectations for what the Federal Reserve will do about it.

Early in the year, stocks rallied and bond yields eased as hopes rose that cooling inflation would get the Fed to take it easier on its hikes to interest rates. Then, stronger-than-expected reports on the economy raised worries that inflation is not cooling as smoothly as hoped.

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While that calmed worries about an imminent recession, it also forced Wall Street to raise its forecasts for how high the Fed will take interest rates. Higher rates can drive down inflation, but they also hurt prices for stocks and other investments and can create a recession in the future.

On Monday, Treasury yields held relatively steady following their own roller-coaster movements this year. The yield on the 10-year Treasury was at 3.97 per cent after topping 4 per cent last week and reaching its highest level since November. It helps set rates for mortgages and other loans central to the economy’s strength.

On Wall Street, technology stocks were some of the market’s strongest. They tend to be some of the biggest beneficiaries of lower interest rates, which can boost demand by investors for high-growth companies.

Apple rose 1.9 per cent, and Microsoft ticked up 0.6 per cent to be the two biggest forces lifting the S&P 500.

On the losing end was Tesla, which fell 2 per cent. Over the weekend, it cut the prices of two of its most expensive vehicles.

Bigger action may be ahead later this week, with several potentially market-moving events on the calendar.

Fed Chair Jerome Powell will testify before Congress for two days, beginning on Tuesday. Other Fed officials’ comments recently have led to big swings in markets, as traders try to get ahead of the next moves by the Fed.

The Fed has been trying to cool growth in wages to remove pressure on inflation, which remains far above its 2 per cent target, and blowout figures could cause it to get more aggressive about rates.

The Fed’s next move on rates will arrive later this month. Besides Friday’s jobs report, upcoming releases on inflation across the economy will likely also carry a lot of weight on the decision.

The Fed has pulled its key overnight rate to a range of 4.50 per cent to 4.75 per cent, up from virtually zero at the start of last year, in its fastest set of hikes in decades. Last month, it dialled down the size of its increases and highlighted progress being made in the battle to get inflation lower.

AP

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Source: Thanks smh.com