Note from the MD: Markets up despite 10th straight RBA rate rise

Happy International Women’s Day! I’d like to acknowledge the immense talent, skills, determination and strength that women contribute to Reach. 

Happy International Women’s Day! I’d like to acknowledge the immense talent, skills, determination and strength that women contribute to Reach. 

The ASX200 (ASX: XJO) opened 0.8% lower after a good start to the week. Tuesday saw the RBA raising rates to an 11-year high of 3.6%. The softer, less hawkish tone, out of the RBA’s accompanying overnight news came from FED chair Jerome Powell indicating the US central bank could return to a more aggressive tightening path. This news pushed the US 2yr/10yr bond yield to its deepest gap since 1981.

On a positive note for consumers the ACCC’s latest airline competition report indicated that average revenue per passenger, which represents average prices across all fare types, declined by 13 per cent in real terms between December 2022 and January 2023. Down from a 15-year high in December 2022. 

The Aussie dollar also weakened around 0.4% on average against all of its major currency pairs, having the opposite reaction to shares off the back of the RBA’s Monetary Policy announcement.

That said, over the last five days the XJO has gained 1.46% and closed 3.41% lower than its 52-week high of 7,624.80, which is only 0.1% (or 8 points) from its all-time high of 7,632.80. 

In global markets overnight, U.S. stocks dropped sharply after Federal Reserve Chair Jerome Powell’s hawkish comments in front of the Senate Banking Committee, suggested a larger interest rate hike in the next policy meeting. Previously, Powell had said a ‘disinflationary process’ had begun, although recent U.S. inflation data and stronger economic data have suggested otherwise.

Locally, RBA Governor Philip Lowe, delivered a speech this morning, stating that an interest rate pause is around the corner but not just yet, providing more colour around the Reserve Bank’s interest rate rise decision yesterday with the state of inflation still “too high”, according to Lowe.

As such, combined with the negative U.S. lead in, the XJO reacted to this by opening lower and dropping 0.71% lower in early morning trading, despite the index moving above its 20-day moving average.

We see support at 7,225, and then below at 6,946, which has recently acted as a pivot point. 7,410 is perhaps the first minor level of resistance, before the next major resistance level at 7,558, just below the XJO year’s high of 7,567.70.

We have a number of deals going live in the coming months, including IPOs, pre-IPOs, and convertible notes as well as ASX-listed placements and exclusive private/unlisted company investments. To find out if you can access these deals, click here.

 

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