Josh Gilbert, Market Analyst at eToro, shares his two things to watch in Australia in the coming days.
RBA rate call
The long-awaited third rate call this year is almost upon us, finally landing this Tuesday. What looked to be a sure-fire cut, with some analysts even pricing in a supersized 50-point slash, is looking less ironclad with each passing day.
Last week’s ABS data revealed that the unemployment rate stayed at 4.1% in April, but an 89,000 rise in employment broke right through expectations. This has obliterated any speculation of a 50bps cut, and dragged the odds of a more restrained 25bps cut down slightly.
Elsewhere, key data still makes a sound case for a cut. Inflation is in the RBA’s target band and the subdued but still present threat of tariffs provides a compelling reason to loosen up local pockets.
It will be interesting to see RBA chair Michele Bullock’s tone during tomorrow’s conference, given the apparent unpredictability of the local jobs market against a fairly volatile global backdrop.
Trade talks continue
Easing trade tensions and Trump’s talks with other nations will continue to be a main focal point for investors this week. Recently, markets have shifted to a more risk-on tone thanks to US trade agreements with the UK and China suggesting that trade tensions are calming, and Q1 earnings for US companies have also reinforced optimism, with many beating expectations on strong cloud and AI-driven growth. Last week’s news of the US’ 90-day reprieve on tariffs on China was very positive for risk assets, particularly technology and cryptoassets. We’re continuing to see this reflected in BTC ETF flows, with IBIT seeing some of its best daily inflows in history last week.
The good news for technology stocks is that supply chain concerns are likely to reduce. There is still the overhang around chip restrictions, which may hold back Nvidia, but this is a better-than-expected outcome for many. For other sectors like retail, however, tariffs continue to hurt, with Walmart announcing late last week that consumers may start to see price hikes from tariffs later this month.
The US-China trade truce is not a final deal, but it's a step in the right direction and another sign that President Trump and his administration are clearly willing to negotiate, and that’s the key. However, let's be clear: the risks are still that these are just pauses; we aren’t yet seeing any structural changes to tariffs. 90-day pauses are all well and good for now, but during that time, we need to see action being taken. India appears to be in line to negotiate with Trump next, and the EU has exchanged negotiating documents with the US after weeks in a deadlock.
Any clarity from a trade perspective will continue to be a tailwind for risk assets. We’ve seen a rotation out of the Magnificent Seven, but their earnings showed us why they still dominate investor portfolios and why, when they pull back, investors aren’t shy to buy the dip.