Note from the MD: Eighth straight RBA rate hike eases markets lower

After a relatively flat day, markets eased lower after the RBA’s final rate hike of the year yesterday afternoon. Led by weaker US markets overnight, which were down by around 2%, the ASX 200 wiped out Monday’s gains of around 0.3%.

After a relatively flat day, markets eased lower after the RBA’s final rate hike of the year yesterday afternoon. Led by weaker US markets overnight, which were down by around 2%, the ASX 200 wiped out Monday’s gains of around 0.3%.

The sectors that led this decline were the bankers and the miners, which were both in the red overall. Given that banking and resource stocks make up roughly half of the ASX 200, the market usually suffers when these share prices fall.

Commodity prices like oil and gold fell quite heavily, due to a strong US dollar that was strengthened after stronger economic data out of America. A stronger US dollar often has an inverse relationship with commodity prices, which is exacerbated by the potential for more interest rate rises by the Fed.

While widely expected, the RBA’s rate rise was compounded by governor Philip Lowe’s hawkish tone in his statement following the interest rate decision. This seemed to mirror his previous statements and signalled to the market that further rate hikes are still on the table.

With markets failing to consolidate gains made overnight after data suggesting Australia and the US still have strong economic activity, it’s clear the central banks of the two countries are holding markets back. This means volatility could remain in the market until inflation stabilises, which presents opportunities for day-trading opportunities like scalping and hedging.

After the RBA raised the cash rate to 3.1% on Tuesday afternoon, Lowe remained resolute in the Reserve Bank’s firm stance on inflation. He indicated inflation was still too high (at 6.9%) while “the size and timing of future interest rate increases will continue to be determined by the incoming data”.

This week, there are some key data points coming out that could set the tone for markets for the rest of the year as 2022 winds down.

Locally, there will be an update on economic growth in Australia tomorrow morning, with the latest GDP growth rate for the third quarter to September, which is the last major data announcement for the year.

In the US, the Federal Reserve meets for the final time of the year, with an update on inflation. With positive economic data earlier in the week indicating a strong US economy that doesn’t appear to be slowing down, this could signal more rate hikes by the Fed.

As the year comes to a close, markets continue to be cautiously watching the central banks’ every move, failing to break through key levels and causing short-term volatility.

We have an upcoming webinar with an Aussie junior gold explorer with a highly prospective Indonesian project with 119 g/t Au (bonanza grade gold) in assay results. Far East Gold (ASX: FEG) is led by some of the biggest names in Australian mining, including Justin Werner of ~$2.7 billion market cap (7/12/22) Nickel Industries, and was recognised as one of the most successful new ASX listings for investors in CY22.

On Monday 12th December at 12pm (AEDT), we will be joined by chairman Paul Walker who will provide an overview on the company’s recent updates and outline its future plans. This will be a fascinating conversation for shareholders and potential investors. Click here to attend.

And with this week, we round up our newsletters for what has been an eventful 2022! We hope you enjoyed reading our weekly updates and articles, participating in our events and investing with us. We’ll be back with more in the new year!

 

Past performance is not a reliable indicator of future performance.

Reach Corporate provides Corporate Advisory Services, including managing investor communications on behalf of Far East Gold Limited and may receive fees for its services.

Any advice contained in this communication is general only and does not consider your objectives, financial situation or needs, and you should consider whether it is appropriate for you. This might mean that you need to seek personal advice from a representative authorised to provide personal advice. If you are thinking about acquiring a financial product, you should consider our Financial Services Guide (FSG) including the Privacy Statement at www.reachmarkets.com.au and the relevant Product Disclosure Statement, Prospectus or offer documents to understand the features, risks and returns associated with the investment.

Reach* may have a material interest in and may earn fees or brokerage from any securities referred to in business or in which we seek to do business with. Please refer to the relevant offer documents for full details.

Trading options is not suitable for everyone. There is a risk that you can lose more than the value of a trade or its underlying assets. You should only act on the information we provide if you are confident that you fully understand what you are doing. Past returns do not always indicate future returns, and it is also possible to make significant losses. There is always a risk of loss when trading and investing.

*Reach refers to Reach Markets Pty Ltd (ABN 36 145 312 232) (CAR No: 431191), Reach Corporate Pty Ltd (ABN 76 638 960 540) (CAR No:1281636), Reach Trading Pty Ltd (ABN 16 615 714 442) (CAR No.1265855) of Reach Financial Group Pty Ltd (ABN 17 090 611 680) who hold an Australian Financial Services Licence (AFSL) 333297.

Sources:

This Week’s News

News

16 April 2024

Gold at record highs – so why aren’t gold stocks?

News

22 November 2023

Rare Earths Industry Review: Part 2

News

22 November 2023

Rare Earths Industry Review

General Advice Warning

Any advice provided by Reach Markets including on its website and by its representatives is general advice only and does not consider your objectives, financial situation or needs, and you should consider whether it is appropriate for you. This might mean that you need to seek personal advice from a representative authorised to provide personal advice. If you are thinking about acquiring a financial product, you should consider our Financial Services Guide (FSG)

including the Privacy Statement and any relevant Product Disclosure Statement or Prospectus (if one is available) to understand the features, risks and returns associated with the investment.

Please click here to read our full warning.