ASX futures were just a point higher this morning, at 6,538 near 7am, while Wall Street was closed for Independence Day – cue Bruce Springsteen – but made broad-based gains on Friday.
Aussie shares are expected to hold the line when trading begins, as we brace for the now-monthly interest rate pain expected to be administered by the RBA at 2:30pm today when the central bank meets.
Most analysts think the bank will go high.
“It is most likely that the RBA hikes interest rate by 50 basis points (bps), but I would not be surprised to see them bring the cash rate to 1.5% by hiking 65bps,” said T. Rowe Price’s Scott Solomon.
“The RBA's governor Philip Lowe's most recent statements suggest they will decide between 25 and 50 bps at this upcoming meeting but recent RBA guidance has not been dependable.
“The RBA has stated several times they feel the overall level of interest rates is too low and a hike to 1.50% followed by another 50-bps hike in August would bring them to 2%.
“At that level, the RBA would be able to step back and truly access the global economy, evolution of labour costs and household spending but also reinforce the commitment to lowering inflation to the 2 to 3% target.”
Some optimism
There was still some cause for optimism, with one analyst saying that the bank’s more frequent monthly meetings, which are out of step with the six-weekly meetings held by central banks in other developed countries, give the RBA the opportunity to flatten out the gradient.
“That may afford it the opportunity to opt for a 25 bp increase in August so long as the June quarter CPI released on 27 July is not a ‘blowout’,” said GSFM Investment’s Stephen Miller.
“A 50:50:25 bp sequencing of rate rises over three consecutive meetings would be virtually equivalent to a 50:75 sequencing over two consecutive meetings in other developed country central banks.”
Investors holding onto tech: eToro
If you think investors are offloading their tech and speculative stocks during these uncertain times, you might be surprised to learn that, alongside the obvious rush on energy companies (Shell, which rose 43% and BP, which rose 39%) amid global price surges, many users of the global multi-investing platform eToro flocked to technology companies.
The platform’s quarter-on-quarter data tells us that Twitter jumped 137% in that time, which covers the media storm over Elon Musk’s initial proposal.
Other tech stocks rounding out the 10 ‘most widely held’ stocks by users of the platform include Tesla, Amazon, Apple and Microsoft.
Airlines crashed – pardon the pun – in favourability among users (United, Delta and American falling 8, 7 and 6% respectively) as did big pharma (Merck & Co dropped 19%, Pfizer and Bayer slid 6%) as users pondered the ongoing stability of these industries in a world where pandemics come and go.
On eToro’s Australian data, Australian market analyst Josh Gilbert said: “Investors have also taken the long view and held onto their ‘big tech’ favourites even as many have been battered in the stock markets this year. This may ultimately be rewarded as they are still growing strongly, with high profit margins and have fortress balance sheets.”
“It is no surprise that Twitter had the biggest increase among Australian investors amid its high profile take over from Elon Musk. This news has significantly captured investors' attention, with many feeling the world’s richest man could be exactly what Twitter needs to take it to the next level.”
In other news
The Aussie dollar rose from lows near 68.25 US cents to a high of 68.90 US cents before settling at 68.60 US cents late in the North American day.
Brent crude futures – and global oil prices generally – were up by around 2%.
Supply is still the watchword, with unrest in producing countries including Libya and Ecuador, and the ongoing assault on Ukraine.
These concerns seem to have balanced out the dampening effect of a slowing global economy.