The ASX200 surrendered early gains on Tuesday to end the day marginally lower as some of the large miners weighed on the index e.g. BHP Group (BHP) -2% and RIO Tinto (RIO) -3.25%. The RBA released its “minutes” at 11.30am on Tuesday, the unveiling of Philip Lowe & Co’s thoughts at their most recent policy meeting 2-weeks ago took some of the puff out of the hawks sails, at least for a few days, which in the process led to some selling in the banks and resources i.e. the largest sectors in the ASX:
- The RBA maintained its dovish stance at its October meeting, the minutes reiterated the Bank is not expecting economic conditions to improve enough for a rate hike before 2024 – a big call in our opinion.
- They believe that the Australian economy will return to growth in the December quarter but not back to its pre-delta path until the 2nd half of 2022.
- Topically, the RBA said that higher interest rates would cool housing, but then went further to say that it would come at the undesirable cost of fewer jobs and weaker wages growth. Hence they will look at toughening lending standards further, especially at the more riskier end of the curve i.e. higher debt-to-income ratios & / or high loan-to-valuation ratios.
NB A Hawk in economic language believes monetary policy makers should adopt higher interest rates to curb inflation.
Again, yesterday we saw a great example of when the news isn’t too bad stocks / sectors rally, in this case the RBA’s very tempered view towards interest rate hikes saw the IT stocks advance strongly following a lacklustre opening, the sector ended the day up 1.6% to trump all of its peers in the process.
Overnight US stocks rallied strongly with earnings from the likes of Johnson & Johnson (JNJ US) beating expectations, the 5th day of straight gains has taken the market to within 1% of its previous all-time high. The SPI futures are pointing to a gain of around 40-points this morning for the ASX200 with broad-based strength likely on the agenda.
MM remains bullish the ASX targeting fresh highs in the weeks / months ahead
Add To Hit List
